Elizabeth Warren Proposes New Bankruptcy Laws
Her proposed Consumer Bankruptcy Reform Act would be a lifeline for struggling families — offering a better shot at financial recovery. The Act would put an end to predatory loopholes and slam the door on illegal debt collection practices. Most importantly, it would wipe out the unjust law that traps Americans under the crushing weight of student loan debt.
The Consumer Bankruptcy Reform Act of 2025 proposes a new Chapter 10— that would replace Chapters 7 and 13 for consumer bankruptcies;
The CBRA’s Chapter 10 is designed to protect more of a debtor’s income and assets, reducing the chances of liquidation.
The new law encourages caps on interest rates, that could limit returns for creditors.
Automatic Stay Enhancements
The automatic stay already halts most collection efforts as soon as a case is filed. The CBRA proposes expanding the stay to:
- More aggressively prevent eviction and foreclosure actions
- Limit creditor motions to lift the stay, particularly for repeat filers
- Apply stay protections retroactively in some circumstances
Protections for Co-Debtors and Guarantors
The new legislation also includes enhanced protections for co-debtors and guarantors of consumer debt. This would make it harder for creditors to pursue collection against third parties I.e. co-signers or jointly liable spouses.
Restructuring of Secured Claims
Secured claims would face limitations on how much interest can be charged during a repayment period. For example, auto lenders could be restricted to collecting the current replacement value of the vehicle, with capped interest rates even if the original loan terms differ.
Unsecured Creditors Take a Hit
Unsecured creditors may be the biggest losers under the CBRA. The proposed repayment formula favors minimal contributions from debtors with limited disposable income, and many cases may result in zero or very low repayments to unsecured creditors.
Credit card companies, medical debt collectors, personal loan servicers, and debt buyers could all see a sharp reduction in recoverable amounts under the new structure.
Student Loan Dischargeability
The CBRA proposes making student loan discharge easier by eliminating the undue hardship requirement that currently governs adversary proceedings for educational debt.
This could significantly expand discharge opportunities for borrowers, affecting both private and federal student loan servicers. If the Act passes, creditors in the student loan industry may face increased losses and legal challenges, especially from borrowers with older or defaulted loans.
(Senator Sheldon Whitehouse (D-R.I.) cosponsored the legislation in the Senate. Representative Pramila Jayapal (D-Wash.) cosponsored the legislation in the House.)