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Congress to Consider New Consumer Bankruptcy Proposal

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Congress may soon consider a new bankruptcy reform bill introduced by Senator Elizabeth Warren, according to CBS News. Warren has previously moved to introduce legislation aimed at bankruptcy reform, and she plans to reintroduce a bill for the Consumer Bankruptcy Reform Act. In a statement connected to the proposed legislation, Warren emphasized that, when people file for bankruptcy out of necessity due to medical debt, family dissolution, or the loss of a job, they are “faced with an expensive and complicated system.” She emphasized that her bill “would simplify and modernize the consumer bankruptcy system to make it easier and less expensive for people to get relief.”

While the future of Warren’s proposed legislation is not yet clear, Congress will soon be reconsidering the proposal. What do you need to know about it? Our West Palm Beach bankruptcy attorneys can tell you more about the Consumer Bankruptcy Reform Act.

Details of Warren’s Bankruptcy Reform Proposal 

Warren’s proposal for bankruptcy reform, if it were to become law, offers two ways for individuals or consumers to file for bankruptcy. First, there would be a “no-payment discharge,” which would allow low-income filers to have unsecured debt discharged (while still excluding family support and debt incurred by fraud from discharge). Second, there would be “debt-specific plans” that would “let individuals resolve debts specific to their financial situation, pausing debt collection efforts while the filer remains current on loans.”

Within the debt-specific plans, individuals would be able to create repayment plans for unsecured debt, including student loan debt. Although the process for having student loans discharged in bankruptcy was recently made much less complicated, Warren’s proposal would seek to make the process even easier for debtors. Indeed, the CBS News report underscores, the proposal would completely eliminate student debt from the “exception to discharge” category, meaning that debtors would not even need to prove anything additional — the “undue hardship” currently required to have student loans discharged in bankruptcy — in order to include educational debt in a bankruptcy case.

Debtors Struggling with Debt and the Bankruptcy System

The proposal comes as new bankruptcy data for 2024 is being released. During 2024, more than 400,000 consumers filed for bankruptcy. According to advocates of Warren’s proposal, debtors who file for Chapter 7 bankruptcy, even when they receive a discharge, end up spending approximately $1,500 and struggling to rebuild after a bankruptcy discharge. Chapter 13 debtors tend to fare worse, those who support the proposal suggest.

As CBS News reports, the average Chapter 13 bankruptcy costs approximately $4,500 on average, but more problematic is the fact that “only about a third of people who file Chapter 13 make it to the end and have their debts discharged.” Warren’s proposal would create bankruptcy options that make reorganization easier for debtors, while also making debt discharge less complicated for debtors with few resources.

Contact a West Palm Beach Bankruptcy Attorney Today 

It will likely be quite some time before there is any clarity about the future of Warren’s proposal. In the meantime, if you have any questions about bankruptcy or want to learn more about filing, one of the experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller can speak with you today.

Source:

cbsnews.com/news/elizabeth-warren-bankruptcy-bill/

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