Warren and Nadler Introduce the Consumer Bankruptcy Reform Act of 2020
The Consumer Bankruptcy Reform Act of 2020 would simplify and modernize the consumer bankruptcy system to make it easier for individuals and families forced into bankruptcy to get back on their feet
One-Pager (PDF) | Bill Summary (PDF) | Bill Text (PDF) | Letter of Support from 74 Bankruptcy Law Professors (PDF)
Washington, DC - United States Senator Elizabeth Warren (D-Mass.) and House Judiciary Committee Chairman Jerrold Nadler (D-N.Y.) introduced the Consumer Bankruptcy Reform Act of 2020, bicameral legislation to simplify and modernize the consumer bankruptcy system to make it easier for individuals and families forced into bankruptcy to get back on their feet.
This legislation is co-sponsored by Senators Dick Durbin (D-Ill.) and Sheldon Whitehouse (D-R.I.) and House Antitrust Subcommittee Chairman David N. Cicilline (D-R.I.).
"Our bankruptcy system too often fails to provide financially struggling individuals and families the relief they desperately need," said Senator Warren. "The Consumer Bankruptcy Reform Act of 2020 will take long overdue steps to make it easier and less expensive for financially-strapped families and individuals to obtain meaningful bankruptcy relief and give Americans a better chance to get back on their feet."
"Bankruptcy is an option of last resort, but it also promises a fresh start so that people can get back up and keep working and providing for their families," said Chairman Nadler. "Today that promise rings hollow for many people because the bankruptcy system has become complex, unfair, and even punitive for ordinary consumers. The Consumer Bankruptcy Reform Act ensures that the bankruptcy system works for the American people and not just big corporate creditors. Senator Warren and I have worked on this issue for many years, and I look forward to continuing our fight for consumers with this new legislation."
"As we grapple with the economic consequences of the COVID-19 pandemic, American families will continue facing serious financial pressures," said Senator Durbin. "Whether it is finding ways to help families stay in their homes during bankruptcy, to restoring dischargeability of student loans, to addressing racial and gender disparities in the bankruptcy system; we must end years of delay and finally make our bankruptcy system fairer by passing this legislation."
"Our bankruptcy system tends to put the profits of big corporations ahead of families fighting to stay afloat," said Senator Whitehouse. "I'm proud to support this sensible bill to allow Americans facing financial hardship to free themselves of student loan and medical debt."
"I'm proud to join Senator Warren and Chairman Nadler in introducing this important bill," said Chairman David N. Cicilline. "Giving people a fresh start is the cornerstone of our bankruptcy code. But for too many, that relief is out of reach due to significant burdens and high costs. This bill will remove these barriers and bring much-needed reforms that give working Americans a fair shot and a second chance at economic opportunity."
The ongoing COVID-19 pandemic and economic crisis has left millions of Americans out of work, drowning in debt, and struggling under the weight of medical bills, student loans, mortgages, and car loans. Even before the pandemic hit, Americans were already hanging on by their fingernails. In the last 40 years, consumer credit skyrocketed as Americans, faced with stagnant wages, took on more debt to deal with the increasing costs of housing, education, medical care, and child care. For millions of households, a shock like a job loss or a family illness can send them tumbling over a financial cliff. Recent reports warn that a wave of bankruptcies is on the horizon.
The bankruptcy system is supposed to be a lifeline of last resort; instead, individuals and families forced into bankruptcy encounter a broken system that too often fails to provide them with the financial relief they seek and benefits big corporate creditors.
The Consumer Bankruptcy Reform Act will:
- Make it easier and less expensive for financially-strapped families and individuals to obtain financial relief by replacing the two separate consumer bankruptcy chapters with a single system available to all consumers, streamlining the filing process, and reducing filing fees.
- Ensure that filers can care for themselves and their families during the bankruptcy process by helping renters with back rent avoid eviction and continue to make payments, making student loan debt dischargeable in bankruptcy, and allowing people to protect their homes and cars during the bankruptcy process.
- Help address racial and gender disparities in the bankruptcy system by ending the special privilege that prevents people from discharging local government fines in bankruptcy; preventing individuals from obtaining relief from debts arising from civil rights violations; and exempting sources of income and assets traceable to alimony, child support income, the child tax credit, and the Earned Income Tax Credit (EITC).
- Close loopholes that allow the wealthy to exploit the bankruptcy system, including the "Millionaire's Loophole" and "spendthrift clause loophole."
- Crack down on predatory practices and hold corporate wrongdoers accountable by banning collection of debts that violate consumer protection laws, allowing lawsuits against creditors that attempt to collect previously discharged debt, and preventing creditors from pursuing consumers in mandatory arbitration.
The Consumer Bankruptcy Reform Act of 2020 has been endorsed by Action Center on Race & the Economy (ACRE); Alliance for Retired Americans; American Federation of State, County, and Municipal Employees (AFSCME); Americans for Financial Reform; Asian Pacific American Labor Alliance, AFL-CIO; Association of Young Americans (AYA); Consumer Federation of America; Demos; National Alliance for Partnerships in Equity; National Association of Consumer Advocates; National Association for Equal Opportunity in Higher Education (NAFEO); National Consumer Law Center (NCLC); National Indian Education Association (NIEA); Progressive Change Campaign Committee; Public Citizen; Service Employees International Union (SEIU); Social Security Works; UnidosUS; U.S. PIRG; and Young Invincibles. A group of 74 law professors who specialize in bankruptcy and consumer law have also sent a letter in support of this legislation.
"The Association of Young Americans (AYA) is deeply appreciative of,
and pleased to endorse, the Consumer Bankruptcy Reform Act introduced by
Senator Warren and Chairman Nadler, which would help young Americans forced
into bankruptcy get back on their feet," said Ben Brown, Founder,
Association of Young Americans. "This bill would create a less
hostile financial relief environment for people struggling financially,
especially at a time when millions of young people are being crushed by student
debt, dealing with economic fallout from COVID-19, and experiencing intense job
insecurity. Senator Warren's and Chairman Nadler's legislation is commendable
as it would make it easier for people to obtain relief by streamlining the
bankruptcy filing process, ensuring rent protections, making student loans
dischargeable in bankruptcy, and protecting filers from predatory practices and
exploitation. Along with student debt cancellation, these are the kinds of
policies young Americans need to be enacted in order to stimulate a strong
economy in which all young people are able to meaningfully participate. For
these reasons, AYA advocates for the passage of this bill into law."
"The National Association for Equal Opportunity in Higher Education, the membership and advocacy association for all HBCUs and PBIs, is grateful to Senator Warren and Congressman Nadler for introducing the Consumer Bankruptcy Reform Act, a comprehensive measure to fix our bankruptcy system, to give people forced into bankruptcy a second chance a lifeline of last resort," said Lezli Baskerville, President & CEO, National Association for Equal Opportunity in Higher Education. "This tremendous fix of the broken American bankruptcy system is especially needed at this time as millions of new people are filing for unemployment and millions more are under water with no foreseeable way out. People of color, women, the frontline workers we do not see on the evening news, and others who were thriving before we got mired in the worst pandemic since the 1819 epidemic, and the worst recession in recent years, are buried beneath unpaid rent and mortgages, car loans, medical bills, maxed out on credit cards being used for food, family, and other necessities. The Consumer Bankruptcy Reform Act will give people who fall down a way to get back up again."
"In a time when millions of Americans have lost their jobs and livelihoods due to the ongoing COVID-19 health and economic crisis, it's clear our system needs a stronger financial safety net," said Christine Hines, Legislative Director at National Association of Consumer Advocates. "Senator Elizabeth Warren's and Chairman Jerry Nadler's Consumer Bankruptcy Reform Act is a thoughtful and comprehensive package of protections that supports families struggling with burdensome debt and facilitates sustainable paths to help get them back on their feet."
"Public Citizen enthusiastically supports this critical set of reforms from Senator Warren and Chairman Nadler," said Lisa Gilbert, Executive Vice President, Public Citizen. "Modernizing and clarifying the consumer bankruptcy system is long overdue, and in this time of national economic crisis, making it easier for individuals and families forced into bankruptcy to get back on their feet is just the right thing to do."
"U.S. PIRG supports the Consumer Bankruptcy Reform Act, which will re-balance consumer rights to a fairer bankruptcy process and will give them a better chance to reorganize their finances, especially during a pandemic," said Ed Mierzwinski, Senior Director for Federal Consumer Programs, U.S. PIRG. "Importantly, the proposal includes protections for both homeowners and renters, prohibits and punishes illegal practices by debt collectors and others, addresses racial and gender disparities in the bankruptcy system and eliminates loopholes exploited by the wealthy. Finally, it also eliminates one of the cruelest provisions in U.S. law by removing the provision that makes private and federal student loans non-dischargeable."
"Young people have struggled to obtain solid financial footing since the Great Recession, and the Covid-19 economic downturn only places a heavier burden on millions of Americans already hardest hit," said Dr. Kyle Southern, Policy and Advocacy Director for Higher Education and Workforce, Young Invincibles. "We applaud Senator Warren's and Chairman Nadler's introduction of the Consumer Bankruptcy Reform Act, which would provide a more straightforward path for economically distressed Americans to move forward. In particular, the bill's provision to make student loan debt dischargeable would be a much-needed change in law to help struggling student borrowers. This bill's focus on racial and gender disparities in the bankruptcy system would also foster greater equity and strengthen the strained social safety net."
In the National Association of Consumer Bankruptcy Attorneys' (NACBA) letter of encouragement, NACBA President Colwell stated, "We share Senator Warren's and Chairman Nadler's belief that now is the time to make the improvements to the Bankruptcy Code that have long been needed." The full letter is available here.
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