The Consumer Bankruptcy Reform Act of 2020

March 10, 2021

The Consumer Bankruptcy Reform Act is designed to simplify the bankruptcy code.  It is designed also to offer more generous protections from creditors. The Act has been proposed primarily by Senator Elizabeth Warren,   It has been proposed in response to years of criticism of the infamous Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.   Due to bipartisan support, some form of the new Consumer Reform Act will likely be adopted.

Consumer Bankruptcy Reform Act Focuses on Simplicity

Chapter 10 BankruptcyThe Consumer Bankruptcy Reform Act has been designed to simplify bankruptcy.  In the proposed Act, Chapter 7 and Chapter 13 will be reduced to a single filing type called “Chapter 10.”  This naming is a play on words because the number “10” is set evenly between “7” and “13.”

Most debtors will file for a “No-payment” discharge under this new system.  The new system also allows for 3 standard repayment plans to be proposed.  These plans address either simple repayment, repaying amounts on your mortgage, or repaying other secured debts such as automobiles.  These will be three simple, standardized plan options in consumer bankruptcy.

The Reform Act also Makes Bankruptcy Easier and More Powerful

Under this Consumer Bankruptcy Reform Act, filing will be easier to file for most debtors.    The requirements for repayment of debts will be lessened under the proposed Act.  In addition, a greater portion of the population will be allowed to pursue a simple discharge of debts.   This is because the income level that will allow a no-payment discharge will be increased by 35%.   Essentially, fewer bankruptcy filers will be required to do repayment plan.   Also, if a repayment plan is required, special changes have been made to make many of these plans easier with lower payment amounts.

Declare BankruptcyThe Consumer Bankruptcy Reform Act will also make it easier to pay for bankruptcy.   It is proposed in the current Act that all bankruptcy fees will be allowed to be paid in a repayment plan AFTER the bankruptcy case is filed.  This will allow debtors to file their case right away and then pay for it later.

Under the current Act, bankruptcy will also become much more powerful in many cases.   For instance, it is currently proposed under the new Act that student loans will once again be dischargeable in bankruptcy.  This means that you will be able to file bankruptcy on student loans once again.   There will also be greater protections for mortgage holders and residential leaseholders.   Leaseholders will be able to stay in their leases easier.  Lesser amounts will be required for repayment under mortgage and lease situations.

Are you interested in learning more about current topics in bankruptcy?  Make sure to check out our blog.


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