Biden, Warren and the Debate Fight a Decade in the Making

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The friction between the frontrunners isn’t personal. It’s rooted in long standing policy differences, particularly over the rights of Americans to discharge their debts in bankruptcy. The last major overhaul of the nation’s bankruptcy laws took place during the W. Bush administration in 2005. And the GOP administration found an eager bi-partisan partner in its reform efforts in Joe Biden — then a senator from Delaware, a state whose lax financial regulations make it one of corporate America’s favorite places be headquartered, at least on paper.
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The details of the 2005 bankruptcy bill are mind-numbing. But in its broadest strokes, the law made it more difficult for individuals to escape the yoke of their debts. The bill made debt from student loans nearly impossible to dismiss. It raised the bar on discharging medical debt. The law was particularly harsh on what’s known as unsecured debt. Examples of secured debt include mortgages and auto loans. These lenders can always seize the underlying asset if you fail to pay, foreclosing on your house or repossessing your car. The most common form of an unsecured loan? Credit card debt.

For Biden, the ostensible aim of the law was to crack down on fraud, what he termed “unnecessary and abusive bankruptcy” that allowed people with ability to repay their debts to use bankruptcy to slough off their obligations on their creditors, raising costs across the economy to the detriment of “every single American consumer.’’
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Warren, whose academic legal research focused on bankruptcy, had seen first hand how and why families ended up in bankruptcy. She came to see bankruptcy as a tool for families in crisis, whether that was divorce, or job loss, or a serious health problem. Warren understood bankruptcy as a critical part of the safety net — a protection for Americans who would otherwise fall through the cracks.

These differences in worldview exploded onto the national stage in Senate Judiciary Committee hearings on the bankruptcy bill back in February 2005, when Biden and Warren — invited by then Massachusetts Sen. Ted Kennedy as “one of our Nation’s leading experts on bankruptcy law” — sparred over details like fair access to bankruptcy court and who should be responsible for medical debts.
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