A congressional effort to curb bankruptcies might have started with looking at how people were getting into debt. Instead, Congress tackled the problem from the perspective of the creditors, who argued that stricter rules were necessary to forestall abuses of the system and prevent billions of dollars in losses from trickling down to consumers. In 1997, a group of House lawmakers began crafting a bill that would make it harder for individuals to file for bankruptcy by subjecting filers to a means test and giving creditors more opportunities to collect. The credit card companies loved it. After all,
they wrote large chunks of the legislation.
Biden voted to make the bill more moderate, and it died. Then he supported an altered version introduced in the next Congress. Bankruptcy reform would go through the judiciary committee that Biden sat on and had once chaired, and, in the words of one lobbyist, he was the “linchpin” of the effort to pass it.
Credit card companies wanted to limit the options of people filing for personal bankruptcy, but that was only one part of the equation. Delaware also had a lot riding on helping corporations file for bankruptcy. For a variety of reasons, including its high concentration of white-collar lawyers and the pro-business reputation of its courts, the state was the venue for a large percentage of the nation’s Chapter 11 cases. It had even come up with a special fast-tracked bankruptcy process. Filing in Delaware allowed companies that were functionally based elsewhere to “escape the obligation to make the process open,” as
Warren put it.
Bankruptcy cases made
huge gobs of money for Delaware’s legal industry. When reformers introduced language that would force companies to file for bankruptcy in the states where they were actually based—a clause dubbed “the Delaware killer”—Biden used his leverage to defeat it. Ultimately, Biden ended up securing funding for
four more bankruptcy judges in Delaware.
