Today, Senators Elizabeth Warren (D-MA), Dick Durbin (D-IL), and Sheldon Whitehouse (D-RI), along with several House Democrats, introduced the Consumer Bankruptcy Reform Act of 2020. If passed, the bill would fundamentally change the entire bankruptcy system — particularly for student loan borrowers.

Under current bankruptcy law, student loan debt is extremely difficult to discharge. Borrowers must prove they have an “undue hardship” in order to discharge their student loan debt in bankruptcy. However, in practice, this standard has required debtors to meet a very high standard that most cant meet. The new bankruptcy reform bill would make a simple change to the bankruptcy code by simply eliminating the section of the code that exempts student loan debt from discharge. If enacted, student loans would be treated no differently from other forms of consumer debt, and could be discharged without an adversary proceeding, and without having to prove “undue hardship.”

The bill would also greatly reform the bankruptcy system by replacing Chapter 7 and Chapter 13 bankruptcies with a single, unified bankruptcy process known as Chapter 10. According to Senator Warren, “Our Consumer Bankruptcy Reform Act simplifies and modernizes the consumer bankruptcy system to help people struggling with debt – starting by creating a single system for all consumers, streamlining the filing process, and reducing filing fees…I’ve sat in bankruptcy courtrooms and heard the stories of people who worked hard, had big dreams, and whose lives took a terrible turn. Bankruptcy is supposed to be a last resort to help people pull themselves back up. We must fix bankruptcy to give people a fighting chance.”

At this time, it does not appear that the bill will be able to pass the Republican controlled Senate. More to come.