Warren, Nadler, Lawmakers Renew Push to Make Bankruptcy Less Expensive for Families

December 18, 2024

Warren, Nadler, Lawmakers Renew Push to Make Bankruptcy Less Expensive for Families

Bill would simplify the bankruptcy process for individuals and families, address racial and gender disparities in the system, crack down on predatory practices

Bill Text | Bill Summary | One-Pager | 2022 Letter of Support from 86 Law Professors

Washington, DC - United States Senators Elizabeth Warren (D-Mass.) and Sheldon Whitehouse (D-R.I.), along with Representatives Jerry Nadler (D-N.Y.), Ranking Member of the House Judiciary Committee, and Pramila Jayapal (D-Wash.), reintroduced the Consumer Bankruptcy Reform Act, legislation to simplify and modernize the consumer bankruptcy system and make it easier for people forced into bankruptcy to get back on their feet.

Over the last 40 years, consumer credit has skyrocketed as Americans took on more debt to deal with the increasing costs of housing, education, medical care, and child care - all while wages stayed stagnant. For millions of households, a job loss or a family illness can send them tumbling over a financial cliff, struggling under the weight of medical bills, student loans, mortgages, and car loans.

Originally introduced in 2020, Senator Warren's Consumer Bankruptcy Reform Act aims to streamline the consumer bankruptcy process with a single, unified system. This reform will simplify the filing process, reduce filing fees, and ensure filers can take care of themselves and their families during the bankruptcy process, including by helping renters avoid eviction and helping safeguard homes and cars. Notably, the bill will allow individuals struggling with student loans to discharge the debt through bankruptcy, reversing a 2005 change that allowed special treatment for private student loan companies and offering significant relief to many who are burdened by educational expenses.

"People typically file for bankruptcy for one of three reasons: a job loss, a medical problem, or a family breakup - and when they do, they're faced with an expensive and complicated system. My bill would simplify and modernize the consumer bankruptcy system to make it easier and less expensive for people to get relief," said Senator Warren. "I've dedicated my career to fighting for working families, and I'll keep fighting to make sure people forced into bankruptcy have the tools to get back on their feet."

"Bankruptcy is a key tool that allows individuals and families to get back up and keep working and providing for their families," said Ranking Member Jerrold Nadler. "Today that promise rings hollow for many people because the bankruptcy system has become complex, unfair, and even punitive for ordinary people. 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."

"Big corporate debtors continue to reap the rewards of our broken bankruptcy system while everyday Rhode Islanders facing financial hardship struggle to obtain basic relief," said Senator Whitehouse. "I'm pleased to support this bill that makes the consumer bankruptcy system fairer and easier to access for those facing crushing personal debt."

"Bankruptcy is a critical tool to help people who have fallen into debt get back on their feet, but the United States' consumer bankruptcy system is broken - it is overcomplicated, outdated, and often inaccessible for poor and working families. It's past time that we fix this system and make it work for everyday Americans, not the profits of big corporations," said Representative Jayapal. "This legislation would make the process of filing for bankruptcy both easier and less expensive, help Americans take care of themselves by protecting their cars and homes, and close loopholes that allow predatory companies to rip people off and exploit the system. I'm proud to be fighting alongside Senators Warren and Whitehouse and Congressman Nadler to level the playing field for everyday people."

The Consumer Bankruptcy Reform Act would:

• Make it easier and less expensive for financially-strapped families and individuals to get financial relief.
• Help filers care for themselves and their families during the bankruptcy process, and protect individuals' and families' dignity.
• Help address racial and gender disparities in the bankruptcy system.
• Close loopholes that allow the wealthy to exploit the bankruptcy system.
• Crack down on predatory practices and hold corporate wrongdoers accountable.

"Many families who struggle with debt don't get help through bankruptcy because they can't afford the high costs needed to file or because the relief available has not kept up the debt problems families face today. This Act will ensure that those who need bankruptcy are not denied access simply because they cannot afford entry to the system, and it will give them a meaningful opportunity for a fresh start," said John Rao, Senior Attorney at the National Consumer Law Center.

"This legislation will repair some of the harms caused by the 2005 Bankruptcy Act, which allowed big businesses to use the bankruptcy rules, but made it far harder and far more expensive for people - especially Black, Latine, and lower-income families - to obtain needed bankruptcy relief," said Christine Chen Zinner, Senior Policy Counsel for Consumer Financial Justice at Americans for Financial Reform, "Eliminating many of the burdensome and expensive hurdles from the 2005 Bankruptcy Act will once again allow everyday people - and not just powerful corporations - the opportunity to get a fresh financial start."

"Public Citizen is heartened to see Senator Warren's leadership on the important set of reforms packaged in the Consumer Bankruptcy Reform Act, and is proud to endorse these measures that would reduce the pain faced by those facing economic hardship and provide a more streamlined path forward for them to get back on their feet," said Elizabeth Beavers, Congress Watch Director at Public Citizen.

"The Consumer Bankruptcy Reform Act is a lifeline for struggling families, offering a fair shot at financial recovery. It puts an end to predatory loopholes and slams the door on illegal debt collection practices. Most importantly, it wipes out the unjust law that traps Americans under the crushing weight of student loan debt," said Adam Rust, Director of Financial Services at Consumer Federation of America.

"Young people have faced unique financial struggles and grappled with finding stability in the uneven and slow recovery from a series of economic crises," said Kristin McGuire, Higher Executive Director at Young Invincibles. "Senator Warren is taking a bold stance to help young Americans find a path for economic recovery and Young Invincibles is proud to endorse the Consumer Bankruptcy Reform Act of 2024. Ensuring student loan debt is dischargeable like other debts and addressing the racial and gender disparities in the bankruptcy system are long overdue and necessary steps toward financial freedom for young adults and borrowers."

"The Consumer Bankruptcy Reform Act is a much-needed step in making sure our bankruptcy system gives individuals a fair shot at a second chance. In addition to simplifying the bankruptcy process, this bill would also ensure that student loan debt is treated equally to other types of debt and make it possible to discharge municipal fees that can be harmful to people's stability and often have collateral consequences. We appreciate Senator Warren's dedication to economic justice and fairness, and this bill exemplifies that dedication," said Ariel Levinson-Waldman, Founding President and Director-Counsel at Tzedek DC.

Senator Sheldon Whitehouse (D-R.I.) cosponsored the legislation in the Senate. Representative Pramila Jayapal (D-Wash.) cosponsored the legislation in the House.

The Consumer Bankruptcy Reform Act has been endorsed by: Action Center on Race and the Economy, Americans for Financial Reform, AFL-CIO, National Association of Consumer Advocates, Consumer Federation of America, Demos, National Consumer Law Center, National Alliance for Partnerships in Equity, Public Citizen, UnidosUS, Young Invincibles, Tzedek DC, Center for LGBTQ Economic Advancement and Research (CLEAR), Progressive Change Campaign Committee, Center for Responsible Lending, U.S. PIRG, American Federation of State, County and Municipal Employees (AFSCME), and the Asian Pacific American Labor Alliance (APALA).

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