Elizabeth Warren rolled out a plan Tuesday to restore bankruptcy protections repealed in a 2005 law championed by Joe Biden, taking an implicit shot at the Democratic presidential front-runner just weeks before the first nominating contests next month.
The 2005 law raised eligibility requirements and financial costs for Americans to file for personal bankruptcy, a last resort for many to eliminate debt. Warren’s proposal would eliminate obstacles erected by that measure and allow Americans to clear out student debt in bankruptcy.
Her plan would also allow people to protect their homes and cars in the process.
The battle over the bankruptcy measure is part of a longstanding struggle within the Democratic Party between a business-friendly faction and a populist wing hungry for confrontation with Wall Street. In 2005, Biden, then a U.S. senator from Delaware, clashed with Warren, a Harvard law professor whose specialty was bankruptcy and who waged an unsuccessful campaign to thwart the legislation, which was enacted by President George W. Bush.
“I lost that fight in 2005, and working families paid the price,” Warren wrote in her policy paper, saying that the law allowed banks to squeeze struggling Americans to bolster their profits.
Her new plan, she said, would “repeal the harmful provisions in the 2005 bankruptcy bill and overhaul consumer bankruptcy rules in this country to give Americans a better chance of getting back on their feet.”
Although she doesn’t mention his name, Warren’s message in the policy paper is that Biden helped break the bankruptcy system and that she is trying to fix it. She cites the Consumer Financial Protection Bureau, an agency she helped create in 2009 before becoming a U.S. senator from Massachusetts.
Warren has previously accused Biden and other proponents of the bankruptcy measure of siding with banks and credit card companies, which have a major presence in Delaware, over cash-strapped Americans.
Warren said that if elected president, she would create a single bankruptcy system that would be available to all consumers. It would replace the two main types of personal bankruptcy that are available now and that she says are flawed: Chapter 7, under which individuals have to surrender their property, and Chapter 13 which requires debtors to enroll in multiyear repayments.
Instead, Warren would offer a “menu of options” that she says would help cater to the needs of each case, including surrendering property or choosing to enroll in a payment plan.