Eliminates chapter 7 and 13 bankruptcy and allows for mortgage cram downs. YES, mortgage cram downs…
On Thursday, Democratic Sen. Elizabeth Warren and Rep. Jerry Nadler introduced SB 4980. Or should I say reintroduced? This bill was last attempted in 2020 and died a merciful death at the hands of a GOP controlled Senate. In Senator Warren’s own words, the primary focus of this bill is to, wait for it… “focus on racial and gender disparities in the bankruptcy system”. Of course, this panacea of a bill also allows for the discharge of student loan debt.
The new bill, is titled “A bill to amend title 11, United States Code, to add a bankruptcy chapter relating to the debt of individuals, and for other purposes.” Other purposes? Read into it what you wish.
Quite a mouthful when compared to their failed 2020 attempt simply titled “The Consumer Bankruptcy Reform Act of 2020” ; SB 4991.
Read the Bill Summary Here!
The proposed bill, whose full text is not yet available, would eliminate Chapters 7 and 13, and create a new Chapter 10. This new chapter would give debtors two paths to follow: Route 1; a straight discharge of debts, similar to chapter 7; and Route 2; like a chapter 13, allows for the cram down and discharge of unsecured portions of loans on both autos and home loans!
Yes, home loans, as well.
For auto loan borrowers, this bill ends the requirement that filers pay the full amount of the loan in order to keep their vehicle, as in a chapter 7. Under the bill, individuals are required to pay only the liquidation value of their secured auto loans, apparently within the payment plan and not as a “redemption” as currently stands.
As with current law, there is the exception for cars purchased 90 days before bankruptcy.
Warren’s rehashed proposal, co-sponsored by Democrat Jerrold Nadler of New York, comes as student loan debt has reached a record $1.7 trillion. Federal student loan payments, paused over the past two years due to the pandemic, are about to resume on January 1st of 2023. Just about in time for the recession to kick in and just after everyone has loaded up their credit cards from Christmas shopping.
With the fate of the Democrat controlled Houses up in the air after the coming mid-term election, this may be their last chance to pass this mess.
Once upon a time, before Covid, a Biden presidency, UFO’s and all the other insanity of this decade, I would have had said that it could never happen. Now? Who knows.
Kevin Armstrong
Publisher
Footnote: Chapter 10, once known as “Chapter X,” listed the processes and procedures for bankruptcies involving corporations. Chapter 10 was initially introduced as part of the Bankruptcy Act of 1898 as a blueprint for reorganizing financially troubled companies until later incorporated into the Chandler Act of 1938. It was all together eliminated by the Bankruptcy Reform Act in 1978.
It’s back – Chapter 10 bankruptcy bill reintroduced – Bankruptcy – Warren
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