Elizabeth Warren has taken on the 2005 Bankruptcy Reform Law on her presidential campaign trail and brought up a long-standing controversy with the frontrunner in the race, Joe Biden.
“I’m announcing my plan to repeal the harmful provisions in the 2005 bankruptcy bill and overhaul consumer bankruptcy rules in this country to give Americans a better chance of getting back on their feet,” Warren said in her plan published on her website on Tuesday.
Warren, a law professor who taught bankruptcy law, has over 15 years of expertise in the field as a bankruptcy attorney. She entered the political arena when in 2005, she vehemently opposed the then proposed version, which was much in favor of the credit card companies.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it hard and costly for individuals to file for bankruptcy while it widened the possibilities for creditors to collect their money. Warren’s proposal seeks to repeal most regulations in the bill.
“Thanks in part to the 2005 bankruptcy bill, our current system makes it far too hard for people in need to start the bankruptcy process so they can get back on their feet,” Warren wrote. “My plan streamlines the process, reduces costs, and gives people more flexibility in bankruptcy to find solutions that match their financial problems.”
“Forcing people into Chapter 13 because they cannot afford to pay their lawyer upfront is a ridiculous way to run a consumer debt relief system,” Warren wrote.
The 2005 bill was drafted and helmed by no less than Joe Biden, who, being a Senator of Delaware at that time, was serving the interests of his constituents very well. Wilmington, Delaware was the hotspot of several credit card companies, and Biden made great efforts to lodge the bill through Congress with the consent of many Republican senators, meanwhile shooting down many Democrat proposed amendments.
In a 2001 hearing according to Politico Biden said: “… An awful lot of people are discharging debt who shouldn’t. This voluminous increasing in filing—it is exponential what has happened. Something is up, and that happened when the economy was booming, absolutely booming.” The rising bankruptcy rate was driving up prices for everybody else, he argued, including “people where I come from.” “So I am so sick of this self-righteous sheen put on anybody who wants to tighten up bankruptcy is really anti-debtor,” Biden said. “People are getting hurt.”
Warren wrote: “In 2005, Congress rejected an amendment to the bankruptcy bill that would have allowed parents to spend a reasonable amount of money on toys and books and basic recreation activities for their kids during the bankruptcy process.
That’s just wrong,” she said, “and my plan will provide those protections.”
The biggest issue, however, Warren has with the Act is that it protects extremely wealthy bankruptcy applicants because it provided certain “loopholes,” as Warren calls them to stash away their assets in trust-funds out of reach of the Justice or the tax service.
“Loopholes benefiting wealthy individuals. In certain states like Delaware, wealthy individuals can file for bankruptcy and get debt relief while shielding their assets by placing them in trusts for their own benefit. This is known as the “Millionaire’s Loophole.” As part of the 2005 bankruptcy legislation, Congress pretended to close the Millionaire’s Loophole, while rejecting legislation that actually would have shut it down. My plan stitches up the Millionaire’s Loophole once and for all by ensuring that assets in self-settled trusts and revocable trusts are not exempt from creditors’ claims in bankruptcy.”
Up till now, Warren had remained tacit about this old grudge but, with less than one month to go before the Iowa first Democratic caucus, it could also be an act of digging up the hatchet in a last bid to pass her rival for the Democratic nomination.
