Bill Overview
Title: Consumer Bankruptcy Reform Act of 2022
Description: This bill generally revises consumer bankruptcy law by establishing a new Chapter 10 for individual debtors with not more than $7.5 million in debt. The bill eliminates the ability of individual debtors to file for bankruptcy under Chapter 7 liquidation bankruptcy and repeals Chapter 13, which requires individual debtors to comply with a repayment plan to receive a discharge of debt. Under Chapter 10, debtors may receive a discharge of debt through making minimum payment obligations based on the debtor's assets and income which may result in immediate discharge for individuals with no minimum payment obligation. The bill also provides for residential protections for debtors and revises what type of debt is dischargeable in bankruptcy. An individual may obtain a discharge under Chapter 10 once every six years. Individuals may seek limited bankruptcy proceedings on certain debts, such as a home mortgage. The bill also establishes consumer bankruptcy protections, including by creating a Consumer Bankruptcy Ombuds at the Consumer Financial Protection Bureau.
Sponsors: Sen. Warren, Elizabeth [D-MA]
Target Audience
Population: Individuals with up to $7.5 million in debt seeking bankruptcy relief
Estimated Size: 6960000
- The bill affects individuals seeking bankruptcy relief, specifically those who would have filed under Chapter 7 or Chapter 13.
- The bill establishes a new Chapter 10, which changes how individuals with up to $7.5 million in debt can obtain bankruptcy relief.
- By eliminating Chapter 13, individuals who previously needed to adhere to a repayment plan to have debts discharged are directly impacted.
- Debtors seeking relief for home mortgages or other specific debts will be subject to new procedures under Chapter 10.
- The establishment of consumer protections and a Consumer Bankruptcy Ombuds aims to support individuals navigating bankruptcy, impacting anyone seeking these services.
Reasoning
- The population likely to be affected by this policy primarily falls within individuals who are currently filing or would consider filing for bankruptcy under Chapter 7 or Chapter 13.
- Given the broad cap of $7.5 million in debt for Chapter 10, this reform will primarily affect middle-class and upper-middle-class individuals experiencing financial difficulties.
- Due to cost constraints, not all individuals will be able to access comprehensive legal support, especially in rural or low-service areas.
- A key aspect of the policy is its approach to residential protections and how debt relief can be sought for secured loans such as mortgages, potentially impacting homeowners differently than others.
- The creation of a Consumer Bankruptcy Ombuds should provide some support but might add bureaucracy or be overburdened given the scale of potential users.
Simulated Interviews
IT Specialist (Atlanta, Georgia)
Age: 35 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 10.0 years
Commonness: 15/20
Statement of Opinion:
- This policy sounds like it might make it easier to handle my debts.
- I'm worried about how my mortgage will be handled under this new system.
- Having some support through the Consumer Bankruptcy Ombuds could be beneficial if I need guidance.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 6 | 4 |
| Year 3 | 6 | 3 |
| Year 5 | 7 | 3 |
| Year 10 | 7 | 2 |
| Year 20 | 6 | 2 |
Retail Store Manager (Cleveland, Ohio)
Age: 52 | Gender: male
Wellbeing Before Policy: 3
Duration of Impact: 15.0 years
Commonness: 10/20
Statement of Opinion:
- Eliminating Chapter 7 concerns me, as it was a straightforward process for me before.
- Having a new system is only useful if it doesn't overcomplicate the process.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 3 |
| Year 2 | 5 | 3 |
| Year 3 | 6 | 3 |
| Year 5 | 6 | 2 |
| Year 10 | 5 | 2 |
| Year 20 | 3 | 1 |
Startup Founder (Austin, Texas)
Age: 28 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 12/20
Statement of Opinion:
- This new policy doesn't seem directly applicable to me right now, but knowing my options is helpful.
- Interested in how the debt dischargeability rules might affect student loans in bankruptcy.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 5 | 6 |
| Year 10 | 5 | 6 |
| Year 20 | 4 | 5 |
Retired (Phoenix, Arizona)
Age: 63 | Gender: male
Wellbeing Before Policy: 2
Duration of Impact: 12.0 years
Commonness: 8/20
Statement of Opinion:
- Lifting some of these medical debts will make a big difference.
- With my fixed income, any help with discharge processes is crucial.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 3 | 2 |
| Year 2 | 4 | 2 |
| Year 3 | 5 | 2 |
| Year 5 | 5 | 2 |
| Year 10 | 4 | 1 |
| Year 20 | 3 | 1 |
Actor (Los Angeles, California)
Age: 47 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 7.0 years
Commonness: 6/20
Statement of Opinion:
- Replacing Chapter 13 could influence how I plan financially.
- I hope the new system accounts for people with unsteady incomes.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 4 |
| Year 5 | 7 | 3 |
| Year 10 | 7 | 3 |
| Year 20 | 6 | 3 |
Freelance Graphic Designer (Portland, Oregon)
Age: 39 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 4.0 years
Commonness: 18/20
Statement of Opinion:
- The consumer protections are interesting but might not apply to freelancers like me.
- I’m worried about how flexible the new system can be for us.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 4 |
| Year 5 | 6 | 4 |
| Year 10 | 5 | 3 |
| Year 20 | 5 | 3 |
Construction Worker (Chicago, Illinois)
Age: 29 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 14/20
Statement of Opinion:
- As a new homeowner, I'm wary about the mortgage aspects.
- I'm not familiar with the bankruptcy process, so clarity and assistance are welcome.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 6 | 5 |
| Year 10 | 5 | 4 |
| Year 20 | 4 | 3 |
Small Business Owner (Miami, Florida)
Age: 58 | Gender: female
Wellbeing Before Policy: 3
Duration of Impact: 8.0 years
Commonness: 7/20
Statement of Opinion:
- If this allows my business debts to be more manageable, that's great.
- The new system's long-term impact on my credit is a concern.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 3 |
| Year 2 | 5 | 3 |
| Year 3 | 6 | 3 |
| Year 5 | 6 | 2 |
| Year 10 | 5 | 2 |
| Year 20 | 4 | 1 |
Software Engineer (Denver, Colorado)
Age: 41 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 11/20
Statement of Opinion:
- Complex investment situations may require more than can be offered through a standard policy.
- Maintaining my property under the new regulation is crucial.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 4 |
| Year 10 | 4 | 3 |
| Year 20 | 3 | 2 |
Student (Boise, Idaho)
Age: 25 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 0.0 years
Commonness: 20/20
Statement of Opinion:
- Figuring out how student loans factor into this policy is important for my future.
- I rarely consider bankruptcy, but the economy can be unpredictable.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 4 | 4 |
| Year 10 | 3 | 4 |
| Year 20 | 3 | 4 |
Cost Estimates
Year 1: $150000000 (Low: $100000000, High: $200000000)
Year 2: $130000000 (Low: $80000000, High: $180000000)
Year 3: $120000000 (Low: $70000000, High: $170000000)
Year 5: $100000000 (Low: $50000000, High: $150000000)
Year 10: $90000000 (Low: $40000000, High: $140000000)
Year 100: $50000000 (Low: $25000000, High: $75000000)
Key Considerations
- Public awareness and adaptation to the new bankruptcy laws will be crucial.
- Potential legal challenges or appeals during the transition to the new system.
- Long-term efficiency gains versus short-term implementation costs.