Photo: Martina Albertazzi/Bloomberg via Getty Images
The bitter congressional fight over a 2005 bankruptcy bill might not be fresh on many minds this election year. But Elizabeth Warren wants to change that. On Tuesday, the Massachusetts senator released a plan that would repeal what she characterized as “harmful provisions” of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which increased the expense of credit-card debt and contributed to higher rates of bankruptcy and foreclosure. By doing so, she’s revisiting one of the most pivotal moments in her early public life right as her presidential campaign appears to be faltering.
Warren’s reputation as a liberal reformer is due in part to her work on bankruptcy reform. In the years leading up to the bankruptcy bill’s passage, Warren, then a professor at Harvard Law School, had established herself as a leading national advocate for stronger consumer protections. That quest formed the basis not just for her national profile but for the creation of the Consumer Financial Protection Bureau, which she led. It also put her in direct and public conflict with members of Congress who opposed her proposed reforms. One was a Democratic senator from Delaware named Joe Biden.
Warren’s new bankruptcy proposal will put those old fault lines on display again. In her plan, published as usual on her campaign’s official Medium account, she says she’d make it possible for borrowers to discharge student-loan debt in bankruptcy. She would also abolish Chapter 7 and Chapter 13 consumer bankruptcy categories in favor of a single, streamlined system with fewer requirements for filing. In the process, she’d end a means test that extends the amount of time that Americans in certain income brackets currently spend in Chapter 13 bankruptcy, would waive filing fees for individuals below the federal poverty line, and reduce the amount of paperwork a person must submit in order to declare bankruptcy in the first place. Warren says her reforms would relieve the financial cost and human effort required to file to file for bankruptcy. “The 2005 bill imposed the same onerous paperwork requirements on a middle-class American filing bankruptcy that it did on a wealthy real-estate developer,” she explains. “Both must file the same documentation — including months of pay stubs and old tax returns — much of which is useless to creditors looking to get debts repaid.”
The plan is peak Warren. It’s a savvy callback to her record as a consumer advocate, and highlights her familiar technocratic spin on progressive issues. For these reasons, the plan may be understood as an attempt by Warren to distinguish herself from Bernie Sanders, the only primary candidate to her left. She and Sanders have refrained from criticizing each other directly on the campaign trail. But the Warren campaign has had a difficult few weeks: Her fundraising slowed significantly last quarter, and her totals lagged far behind Sanders’s, as well as Biden and Pete Buttigieg’s. In a new Monmouth poll of voters who say they prioritize progressive positions, Sanders leads Warren by 18 points. As Sanders surges, Warren finds herself obligated to set herself apart from the Vermont senator in nonconfrontational ways. Highlighting her background on bankruptcy reform is one way to fulfill that objective.
But the Warren plan is chiefly Biden bait. Though she doesn’t mention Biden by name, the former vice-president is clearly in her sights.
“In certain states like Delaware,” she writes, “wealthy individuals can file for bankruptcy and get debt relief while shielding their assets by placing them in trusts for their own benefit. This is known as the ‘Millionaire’s Loophole.’” This is familiar territory for Warren, and Biden, too. In his capacity as a senator from Delaware — the home of many major credit-card companies — Biden was one of Warren’s chief antagonists in her quest for bankruptcy reform. Warren herself has referenced that history on the campaign trail. “I got in that fight because [families] just didn’t have anyone — and Joe Biden was on the side of the credit-card companies,” she said at a rally last April. Biden’s son, Hunter, started working for MBNA, a credit-card company, in 1996; as Luke Darby noted in a recent piece for GQ, the younger Biden stayed on as a consultant for MBNA, making $100,000 a year after he became a federal lobbyist in 2001. ProPublica reported in 2008 that the company had been Joe Biden’s “single-largest contributor” for 20 years, and Biden eventually voted for the bankruptcy bill four times until it finally passed.
“I lost that fight in 2005, and working families paid the price,” Warren concedes in her post. But 15 years after the fact, she’s prepared to put Biden on the defensive again.