How bankruptcy was broken

Elizabeth Warren released a meaty plan this week designed to once again make the bankruptcy process what it was intended to be

Someone about to be hit with a gavel.
(Image credit: Illustrated | OnBlast/iStock, Rawpixel/iStock, Asya_mix/iStock, Benjamin_Lion/iStock)

Sen. Elizabeth Warren (D-Mass.) wants to fix American bankruptcy law. Indeed, as she's told people many times, studying bankruptcy is what convinced Warren to quit her career as a Harvard professor and enter politics — it's largely why she jumped ship from the Republicans to the Democrats, and why she became a populist progressive firebrand. As part of her campaign for the Democrats' presidential nomination, Warren just released a meaty plan to reform U.S. bankruptcy law.

The proposals are designed to once again make bankruptcy what it's intended to be: a balanced process that allows creditors to recoup some losses and gives debtors a genuine fresh start, while making sure both parties share responsibility for the failure. But how did American bankruptcy break in the first place? The key turning point was a 2005 law, backed by the banking and credit card industries, that made personal bankruptcy a lot harder to obtain.

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Jeff Spross

Jeff Spross was the economics and business correspondent at TheWeek.com. He was previously a reporter at ThinkProgress.