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What is CBRA and How Might it Affect Your Ability to File Bankruptcy in California?

Now that a new President has been sworn in, many people in the bankruptcy industry are wondering what changes will come as a result of President Biden. To determine what is most likely to happen, we are today looking at the Consumer Bankruptcy Reform Act of 2020 (CBRA) and how it might affect your ability to file bankruptcy in California. Keep reading to learn more or contact The Law Offices of Paul Y. Lee at 888-748-0025 for a free consultation with a bankruptcy attorney.

The Background of the CBRA

Before Biden was inaugurated, he had previously signaled that he would support this plan, which Senator Elizabeth Warren, a long-term advocate for changes to the bankruptcy process, had proposed. Once Biden became the president-elect, Warren introduced CBRA, along with House Judiciary Commitment Chairman Jerrold Nadler. If it is passed, it will result in huge differences in how you can file bankruptcy, which debts can be discharged, and the ways in which property is protected.

The Main Goals of CBRA

According to those who sponsored the bill, they want the CBRA to:

  • Make it easier and more affordable for people to get financial relief
  • Ensure that a person filing bankruptcy can care for themselves and their household while they are in the middle of the bankruptcy process
  • Address racial and gender disparities within the bankruptcy system
  • Get rid of loopholes that currently might allow wealthier filers to exploit the system
  • Hold corporate wrongdoers accountable for illegal activity
  • Crackdown on any predatory practices

Note that this is a very long, 188-page bill, and there are many very specific changes it would make.

CBRA Would Restructure the Bankruptcy Process

Today, a person who files bankruptcy can choose between Chapter 7 or Chapter 13 bankruptcy. If CBRA becomes law, there would be one type of consumer bankruptcy bill, and it would be called Chapter 10. There would be two paths to relief, one similar to Chapter 7. For a person who has little income and few assets, Chapter 10 could help them move forward with no payment. For those who have high-value assets or income that is more than 135% of the state median, they would have a minimum payment requirement.

CBRA Would Be Designed to Remove Current Obstacles to Bankruptcy

There is currently a pre-filing credit counseling requirement, which would be eliminated. It is typically not expensive and can be done online or over the phone, but it is still an obstacle that Warren and other lawmakers do not believe does as much good as it does bad.

This is just a very short summary of a few parts of CBRA and what it would do. If you are considering filing bankruptcy, we recommend you contact an attorney today by calling The Law Offices of Paul Y. Lee at 888-748-0025 for a free consultation.