This year, Americans came out to vote in larger numbers than ever before, and that shows that we appreciate the impact that presidential administrations can have on our lives. That impact affects everything from what you pay at the grocery store to what sort of insurance you can get. One legal tool which could be significantly affected by the incoming Biden administration is bankruptcy protection.
Bankruptcy protections are an important and life-changing option for those struggling with debts beyond what they can pay. Lawmakers, including the President and those he influences, may change the laws regulating bankruptcy, but the Brownsville bankruptcy attorneys at the Law Offices of Phillippe and Associates will be here to help Texans access those protections however we can.
COVID-19 and Bankruptcy
To understand how the incoming Biden administration could affect potential bankruptcy filers, we first need an understanding of the current bankruptcy landscape. Following a recession, bankruptcy filings are generally expected to increase, as they did in 2007 onward. However, so far, a wave of coronavirus personal bankruptcies has yet to hit.
That being said, that trend is expected to break once federal aid and lending moratoriums end. Corporate bankruptcies have already increased, and personal bankruptcies are expected to follow suit.
With a surge of bankruptcy filings expected, many lawmakers are looking for ways to make bankruptcy filings more accessible to the many people in need across the country. One silver lining of the current pandemic could be improved access to government assistance in general, as the need for these types of assistance has never been more clear.
Even so, the pandemic has slowed court proceedings across the country. While laws surrounding bankruptcy may improve, COVID-19 is likely to continue to have this effect on filings for the beginning of Biden’s term.
Biden’s Record on Bankruptcy
There are a few different indicators we can look at to determine how a Biden presidency might affect bankruptcy protections. The first is his history on the topic. In 2005, Biden supported the Republican-backed Bankruptcy Abuse Prevention and Consumer Protection Act. However, it’s important to note that Biden has since come out against the changes put in place by the act he helped get passed.
The passage of this act introduced mountains of new paperwork between filers and the relief that they seek. The law was intended to keep those who could afford to pay their debts from using bankruptcy instead of paying. In practice, the law and its new barriers to entry including massive additional costs discouraged those in desperate need of filing.
Filings dropped by 27% after the act was passed, meaning that either roughly a quarter of filers up to that point were taking advantage of the system, or the new law prevented eligible filers from accessing their constitutionally protected right to bankruptcy relief. While some economists and bankruptcy experts believe the law helped undeserving debtors from accessing relief, others feel it created a mass of “missing bankruptcies” or cases in which filers were eligible for protection but unable to afford the fees of filing.
Biden’s history in regards to this law is somewhat fraught. First, The Washington Post reports that at the time the law was passed, one of the largest credit card issuers in the U.S. was located in Biden’s home state of Delaware. That same credit company spent more than $100 million in support of the 2005 bill. Hunter Biden, Joe Biden’s son, also worked as a consultant at the company from 2001 to 2005.
Joe Biden reportedly called those who criticized his support of the bill “self-righteous”. He negotiated for some exemptions for low-income families and placed a priority on parent support payment debts, but worked to block exemptions for seniors facing homelessness and military personnel in medical debt.
It’s worth noting that Biden likely could not have stopped the passage of this act if he had wanted to. However, his fellow lawmakers felt he could have done more to make sure some protections for consumers remained, according to reporting by the Washington Post.
The Biden Administration’s Plans for Bankruptcy Protections
While Biden’s history regarding bankruptcy is far from stellar, he now has the opportunity to do more to protect Americans in debt. There are several reasons to be hopeful that a Biden administration could mean greater access to bankruptcy protection.
First, within a week of Elizabeth Warren dropping out of the presidential race, Biden endorsed her plan to overhaul the bankruptcy system. Warren was a vocal critic of the 2005 Act that Biden helped pass, and the plan that he endorsed largely undoes the changes put in place by that law. This plan also allows eligible filers to discharge their student debt through bankruptcy. In general, Warren’s plan seeks to align the government’s efforts more with the needs and wants of the American people, and less with the wants of the credit unions charging them.
Biden’s campaign website explicitly cites Warren’s plan as the basis for their goals for bankruptcy reform. This includes getting rid of the significant barriers to entry for filers, addressing “shameful racial and gender disparities that plague our bankruptcy system”, and closing the corporate loopholes that allow “wealthy and corporate creditors abuse the bankruptcy system at the expense of everyone else”.
The Law Offices of Phillippe and Associates: Brownsville Bankruptcy Attorneys for Your Bright Future
From coronavirus to a new presidential administration, there are many reasons to suspect that next year and the years to come could look vastly different from the ones before them.
No matter what changes come our way, the Brownsville bankruptcy attorneys at the Law Offices of Phillippe and Associates will be here to offer support to Texan debtors in need. If you’re struggling to make ends meet due to outstanding debts, bankruptcy could be the tool you need to find your way free.