On December 9th 2020, US Senator Elizabeth Warren and House Judiciary Committee Chairman Jerrold Nadler announced the possibility of a new bill called the Consumer Bankruptcy Reform Act of 2020. The Act will replace chapter 7 and 13 bankruptcy with a single system available to all consumers which would reduce filing fees and create a more efficient filing process. The act will eliminate credit counseling and make 341 meetings permanently remote. This act will help renters who have back rent, continue their payment process and avoid eviction. As well as allow people to protect their homes and cars during the bankruptcy process so they can start back up on firm foundations. The act also intends to address racial, gender, and socioeconomic inequalities in the bankruptcy system.
Through this bill, borrowers will have the option to file a Chapter 10 bankruptcy. Under these provisions, private and federal student loan debt will be treated like any other consumer or credit debt. Consumer debt under $7.5 million would be considered a Chapter 10 and anything above $7.5 million would be a Chapter 11. More importantly, the bill would allow attorneys to be paid overtime. This will provide consumers access to bankruptcy relief if they could not originally afford to file. To seek relief under this new chapter consumers would have to file a short form petition, automatic stay, and information required under 11 U.S.C 521.
It is unsure whether the bill will be passed or not. These new provisions would ensure that the system is fair and accessible to all consumers, making it easier to access the bankruptcy system and discharge debt.
Image from Library of Congress via flickr