Pointing to a recent Democratic Party presidential primary debate as a backdrop, Darby describes a tense confrontation between Joe Biden and Elizabeth Warren over creation of the Consumer Financial Protection Bureau.
However, their debate appearance was not the first time these two had clashed over treatment of American consumers. To be sure, they have a long and bitter history over this issue– reaching all the way back before Biden was vice president and before Warren was elected to the senate. That history began with Biden’s support for and fulfillment of a GOP fever-dream for so-called “bankruptcy reform” in the late 1990s and early 2000s, when he was a powerful senator from Delaware and Warren was still a lowly Harvard law professor.
At that time, Warren and Biden locked horns over the differences between and utility of the two kinds of bankruptcy then available to individuals: Chapters 7 and 13 of the federal bankruptcy law.
Chapter 7, otherwise known as “liquidation” bankruptcy was primarily used by low to moderate income people, and allowed them to sell assets in order to pay creditors, and then discharge most of their remaining debts, all under the watchful eye of the bankruptcy court.
Chapter 13, on the other hand, was used as a reorganizing tool, which placed the debtor on a payment plan, guaranteeing that at least part of their future income would be used to pay creditors — a sort of negotiated garnishment. For creditors, naturally, this was the preferred option because it assured that they would recover at least some of the debt owed to them. And, even more to their liking, in most cases, as interest on the outstanding debt continued to accrue, creditors could and would, over time, recoup even more real dollars than they were originally owed.
2005 changed all of that. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was ostensibly meant to stanch abuse of Chapter 7. BAPCPA established a strict means testing regimen, making it harder for people to declare Chapter 7 bankruptcy versus Chapter 13 bankruptcy.