The last major reform to the bankruptcy code was in 2005. With Elizabeth Warren now in the political limelight, she is calling for radical bankruptcy laws changes. Will the bankruptcy law change soon? A look into the history of the 2005 law change and Elizabeth Warren’s proposal may shed some light on whether a Bankruptcy law change is truly coming.
Elizabeth Warren aggressively fought against the 2005 law change. She understood that it would greatly restrict bankruptcy access. As a law professor and legal researcher, she understood clearly that this would create problems for society. Warren was largely overcome in her clear opposition. After some argument, the law was passed with little changes, coming into effect in October of 2005.
Warren is now committed to being a champion for bankruptcy and debtor rights. She strongly believes that a liberal and open bankruptcy system is required for preserving a free and profitable society. She has proposed several changes to the existing law.
One of the most needed changes she proposes is arguably a liberal, uniform federal homestead exemption. This would set a fair amount that every bankruptcy filer can use to protect their home from creditors. Currently, this system is virtually different in every state. Some states offer high exemptions that are almost unlimited. Other states only allow exemptions as low as $15,000 or even less. The current system is not uniform and unfair in some states. Warren proposes that fair and liberal exemptions for homes and all other property are uniformly provided.
Another powerful change would be the ease of access to bankruptcy. Warren proposes a uniform system that would offer complete relief for the debtor in a merging of the Chapter 7 and Chapter 13 system. All the bankruptcy forms would be simplified and provide easy access online. Then, debtors could either discharge some or all of their debts, or they could elect to pay some of the debts back. This would all be achieved through a simplified, single system. The fees for bankruptcy will be reduced also because of the system’s simplification.
Warren also proposes that debtors could pay their attorney fees after the bankruptcy case is filed. Currently, any work done by an attorney before a Chapter 7 bankruptcy case is filed must be paid for by some party BEFORE the case is filed. Also, the $335 court cost must be paid beforehand. Warren desires to eliminate these requirements by allowing the court and the attorney to be paid through the bankruptcy system at a later date. She argues that this will further increase the ease of access.
Time will tell if Warren will be successful in her goal for a bankruptcy system overhaul. The election may allow a show-casing of the need for this law change. It may actually become a topic of debate in the election.