"WASHINGTON -- Economists at the New York Federal Reserve have concluded that a controversial 2005 law backed by banks and credit card companies pushed more than 200,000 people into foreclosure and exacerbated the subprime mortgage crisis.

Consumer advocates fought hard against the law, which made it much more difficult for individuals to alleviate credit card debt in bankruptcy. This inability of homeowners to eliminate other debts, the New York Fed economists conclude, in turn made borrowers unable to pay off their mortgages, spurring foreclosures...

if consumer financial problems are being driven by factors relatively difficult for consumers to control -- such as a loss of income following a layoff -- the 2005 law may well continue to promote foreclosures. Longtime critics of the 2005 law, including then-Harvard University Law School Professor Elizabeth Warren, who is currently charged with setting up the Consumer Financial Protection Bureau, have emphasized that consumption binges do not explain the high levels of consumer debt and financial distress seen in recent decades.

In an article published by The Boston Review shortly after the 2005 law was passed, Warren argued that flat wages and higher essential household expenses were squeezing the middle class into bankruptcy-- more expensive mortgages due to rising home prices, alongside higher health care costs and higher tax burdens."

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