Senator Warren and Congressman Nadler have introduced the Consumer Bankruptcy Reform Act designed to be the biggest change to the U.S. Bankruptcy Code since the Bankruptcy Abuse Prevent and Consumer Protection Act of 2005. It has not yet passed to any committee for review and is unlikely to be enacted into law as now written.
Primarily, the CBRA would abolish the existing regime for consumer bankruptcies under Chapter 13 and create a new Chapter 10 for individual and small business bankruptcies that will operate somewhat similarly to a Chapter 11 reorganization including a repayment plan to be approved by the Bankruptcy Court.
The CBRA would create a homestead exemption in bankruptcy that would be equal to 50% of the value of the conforming loan limit (as determined by Fannie Mae and Freddy Mac) of a single-family residence within the particular county of the debtor’s residence, or 75% if the debtor is age 65 or older. This would be a very substantial change for folks living in states with minimal or smallish homestead exemptions. It will also do away with the Means Test and eliminate some of the paperwork now required to file. We will keep you informed of its potential progress though congress.