Joe Biden Endorses Warren Bankruptcy Policy
As the number of days to the 2020 election dwindle down and primary results roll in, presidential candidates are refining their policies and campaigns. At a virtual townhall in Illinois in mid-March, former Vice President Joe Biden announced his endorsement of Elizabeth Warren’s bankruptcy policy. When the bankruptcy law currently in place was passed in 2005, Biden and Warren were in disagreement and advocating for opposing sides. This new proposed policy would reverse some of the current legal requirements when filing bankruptcy and change key aspects of the overall structure.
Warren’s proposed policy would change consumer bankruptcy in several ways. She is proposing reforms in filing, debt relief options, and what debts are qualified as dischargeable.
According to Warren, her plan will eliminate some of the initial paperwork filing that can make bankruptcy expensive and lengthen the filing process. It would also eliminate the need for filers to complete a pre-filing credit counseling course. Currently, this course is required by law to be completed within 180 days of filing. Her plan would also eliminate the means test that must be completed to determine if a filer qualifies for Chapter 7 Bankruptcy. This assessment calculates how much of a filer’s income is classified as disposable income, and whether that amount is sufficient to repay debts. To follow the proposed changes in filing, this plan also looks to change the options available to consumer filers.
This new proposal aims to do away with Chapter 7 and Chapter 13 Bankruptcy. In their place would be a “menu of options” ,as described by Warren, to suit needs at an individual basis. This reconstruction is proposed in an attempt to better suit the specific areas a debtor needs to address. A common concern for filers is protecting their assets, especially their cars and home. To address this concern, her policy proposes a uniform federal homestead exemption and the option to modify a mortgage in bankruptcy. The exemption would be set at half of the Federal Housing Finance Agency’s conforming loan limit in the county the filer lives in. By doing so, the limit would be dependent on the area’s income and housing market. Under this plan, debtors would be able to set aside a larger sum of money for their basic needs and their children’s needs. Where applicable, it would also allow filers to continue paying union dues to maintain their employment. Warren’s self-described “menu of options” seeks to give debtors several options to pursue a debt-free life.
This proposed policy seeks to reverse the current laws that restrict discharge of student loan debt in bankruptcy. Under this proposal, student loan debt would be in the same category as the currently dischargeable consumer debts. The student loan debt cancellation plan that accompanies this proposal would also cancel up to $50,000 for 95% of those carrying student loan debt.
Though Elizabeth Warren is no longer a presidential candidate, this proposed policy is now still on the table with Joe Biden’s endorsement. Though over a decade ago the two disagreed on the fundamentals of a bankruptcy plan, the leading democratic nominee is now supporting this policy. The new menu-style plan would change the structure of consumer bankruptcy in the United States.
The full details of Warren’s bankruptcy plan can be found at https://elizabethwarren.com/plans/bankruptcy-reform.