Elizabeth Warren Wants To Get Rid Of Strict Bankruptcy Rules

In a new announcement, Sen. Elizabeth Warren (D-Mass.) said that if she is elected president, one of her main objectives would be to undo the 2005 bankruptcy bill which she believes played a crucial role in the 2008 recession.

In 2005, Congress passed a bill which made it much more difficult for Americans to declare bankruptcy and narrowed the type of debt that could be included in bankruptcy. Because of this bill, Warren said, bankruptcy filings halved and increased the cost of credit card debt. “It was terrible for families in need,” she said, and still is.

Warren’s newly unveiled plan would have the 2005 bill largely gutted as well as mandate the drafting of new bankruptcy rules. She said the aim will be to, among other things, “end the absurd rules that make it nearly impossible to discharge student loan debt in bankruptcy” and “close loopholes that allow the wealthy and corporate creditors to abuse the bankruptcy system at the expense of everyone else.” In general, she wants to make it easier for Americans facing severe debt to declare bankruptcy.

To achieve this, Warren plans to streamline the bankruptcy filing process as well as give individuals a variety of ways to address their debt – a key part being that a person can keep an important piece of property, such as a vehicle or a house. That way, Warren wrote, individuals and families will have a “firm foundation” after dealing with their debts.

Significantly, Warren’s plan includes allowing individuals to modify their mortgages in bankruptcy. Whereas other types of debt can be negotiated during a bankruptcy, mortgages generally cannot, under the current rules.

The plan would also involve removing bureaucratic and financial hurdles to filing for bankruptcy. According to Warren, doing so would make bankruptcy not only a more accessible, affordable process but would make it a swifter.

Warren also pointed out the need to address the “racial and gender disparities” that arise during the bankruptcy process. Women and people of color are often victims of predatory lending practices, according to Warren, and when trying to file for bankruptcy, have their cases tossed out at high rates or face unusually tough debt negotiations.

Although Warren appeared to be pulling ahead in the Democratic presidential nominee field at the end of summer, she has since been falling back in the polls, currently in third place nationally. For many Americans saddled with debt, Warren’s new plan may sound especially appealing and may well help her polling numbers.