What Are Some Significant Provisions Of The Consumer Bankruptcy Reform Act Of 2020 Introduced Before Congress By Senator Elizabeth Warren?

First, It should be clarified that the Consumer Bankruptcy Reform Act of 2020 is not a law; it is a Bill before Congress. Future guidance depends upon what action Congress implements and possible amendments. The Consumer Bankruptcy Reform Act of 2020, was introduced by Senator Elizabeth Warren. She has an extensive bankruptcy background as a law professor. If enacted, the new law would make fairly revolutionary potential changes to the Bankruptcy Code, including dramatic changes to the bankruptcy practice as it currently exists.

If this bill is approved by both Houses of Congress and signed into law by President Biden, Chapter 7 and Chapter 13 would be eliminated and replaced with a single new chapter designated as Chapter 10. There are substantive changes to existing Bankruptcy Law that would be revised or eliminated by new provisions under Chapter 10. Student loan debts will become dischargeable like any other unsecured debt. Discharges would be issued without the requirement of proposing and complying with a repayment plan in Chapter 13 for debtors whose income is less than 130% of the median income for the state in which the debtor resides. Credit counseling requirements would be eliminated. A debtors’ spending payments would become irrelevant. Instead, the median income levels will determine the total amount to be paid back to unsecured creditors. A new Chapter 10 for debtors who have in excess of 130% of the median income for their state would be required.

There are multiple types of repayment plans that would be allowed, including repayment plans for unsecured debts, residence plans for delinquent mortgage payments, and property plans for non-mortgage secured debts like cars or furniture. Another significant change would be that attorney’s fees can be paid after the case is filed. There are further proposed amendments to exemption laws, which will provide a uniform federal bankruptcy exemption of $30,000 for personal property from all debtors In other words, that federal property exemption would apply in all cases and debtors would be prevented from claiming the potentially more expansive state law property exemptions where they reside.

Another significant provision of Chapter 10 will propose that the pre- petition rent owed by residential tenants be fully dischargeable. A landlord will be forced to continue a lease with a tenant that owes pre filing rent as long as the future rent is paid on time. Another significant provision under repayment plans in existing Chapter 13 cases provides that a discharge of debt is immediate upon plan confirmation. The bankruptcy trustee would be granted a judgment lien to enforce payments owed by a Debtor in a Chapter 10 repayment plan case.

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