Warren’s plan to strip down 2005 bankruptcy bill sets up new clash with Biden

Sen. Elizabeth Warren on Tuesday released a new proposal that would repeal controversial pieces of the 2005 bankruptcy law that she and Joe Biden, then a senior Senate Democrat, repeatedly clashed over nearly two decades ago.

The Warren plan targets a series of provisions that she has criticized for years, arguing that they benefit credit card companies and big lenders at the expense of Americans struggling with consumer, household and student debt.

Biden is not mentioned by name in Warren’s post announcing her plan, but the Massachusetts Democrat’s decision to elevate the issue with less than a month until Iowa begins its caucuses could renew a decades-old conflict with the former vice president, who during his time in the Senate backed the legislation — and, in a now-famous hearing on Capitol Hill, went toe to toe with Warren, then a law professor at Harvard who opposed it.

Warren, who has seen her poll numbers sag after a summer surge, could seek to re-create that dynamic on the debate stage next week in Iowa. Though foreign policy has dominated most of the discussion following President Donald Trump’s order to kill a top Iranian military leader in Iraq, Warren will be keen to steer the policy exchanges to more comfortable territory — and away from her position on “Medicare for All,” the single-payer health insurance plan, which has caused her problems with both moderates and the left.

Bankruptcy policy is firmer territory for Warren, who has studied and written about its effects for large parts of her professional life, and it features prominently on the palette of concerns that caused her to enter politics. Her fluency on the topic could make it a useful springboard for rejiggering the focus of the primary debate and put Biden, who is trending up in recent polls of Iowa, on the back foot.

In a Medium post, Warren picks through the 2005 bill, casting it as unfinished business from a time when she could only, as an academic, offer advice to lawmakers in Washington.

“I lost that fight in 2005, and working families paid the price,” Warren wrote, before touting her own efforts — during the Obama administration — to mitigate the legislation’s effects and establish the Consumer Financial Protection Bureau.

“But there are still serious problems with our bankruptcy laws today,” Warren added, “thanks in large part to that bad 2005 bill.”

The law, which was heavily backed by the banking and credit card industries, made it harder for Americans to get out of debt by filing for bankruptcy. Supporters of the measure said it would prevent financially irresponsible people from abusing the system, while opponents denounced it, saying it would hurt struggling people by increasing the regulation, documentation and costs of seeking bankruptcy protection. Bankruptcies plummeted after the law took effect, but not for the right reasons, consumer advocates argued.

Warren’s proposal would make the bankruptcy system “simple, cheap, fast, and flexible,” she wrote. It would merge the two types of consumer bankruptcy filings — Chapter 7 and Chapter 13 — into one, offering filers a “menu of options” for dealing with their unpaid debt. It would eliminate what she termed “burdensome paperwork” that makes bankruptcy more expensive, deterring some from filing. It would reverse the 2005 law’s requirement that filers seek pre-filing credit counseling, as well as the additional rules it placed on consumer bankruptcy attorneys.

She would also reduce the cost of filing and make it easier for people to keep their homes and cars during bankruptcy. The proposal would make it harder for the wealthy to shield assets in trusts and would crack down on companies that violate consumer financial protection laws while trying to collect on debts.

And in a move that would further solidify her progressive credentials, Warren proposes to end the ban on shedding student loan debt in bankruptcy.

Warren criticized Biden over his role in crafting the 2005 bill earlier in the presidential campaign. On the day he entered the race in April 2019, she sought to sharpen the old battle lines.

“I got in that fight because (families) just didn’t have anyone and Joe Biden was on the side of the credit card companies,” Warren said after being asked about the legislation following a rally in Iowa. “It’s all a matter of public record.”

As reporters began to excavate details — including cutting op-eds by Warren — the Biden campaign snapped back, arguing that the bill, which had been vetoed in an earlier form by President Bill Clinton at the end of his second term, was a “certainty” for passage by 2005, when Republicans controlled Congress and the White House.

“Then-Sen. Biden fought for and won important concessions for middle class families in (the bill),” a Biden spokesman said in May, “including protecting access to Chapter 7 forgiveness for working people, making child support and alimony the number one priority for debt payments — in front of big banks and credit card companies — and forcing credit card companies to warn borrowers about their interest rates.”