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The number of bankruptcy filings in the U.S. has fallen to a level not seen since 1985, thanks to government interventions that kept people afloat during the COVID-19 pandemic and allowed companies to raise cash through debt, the Wall Street Journal reported. In a year marked by lockdowns and periods of high unemployment, 462,309 individuals and companies filed for bankruptcy in the year ended June 30, down 32% from the previous year, according to data compiled by the Administrative Office of the U.S. Courts. That was the lowest tally for a 12-month period since 1985, the administrative office said. Personal bankruptcy filings fell 33% to about 444,000, while business filings declined 17% to about 22,500.

Legislation that would restore struggling borrowers’ right to eliminate student loans through bankruptcy has gained bipartisan support in the Senate, building momentum for a legal change long sought by consumer advocates, WSJ Pro Bankruptcy reported. Sens. Richard Durbin (D-Ill.) and John Cornyn (R-Texas) yesterday announced the "Fresh Start Through Bankruptcy Act," which would allow borrowers who file for personal bankruptcy the ability to discharge taxpayer-backed student loans after a 10-year waiting period. The legislation would also require colleges to partially repay the government for the cost of discharged loans if their students have consistently high default rates and low repayment rates, lawmakers said. About 45 million Americans hold roughly $1.7 trillion in student loans, more than 90% of which is guaranteed by taxpayers, lawmakers said. In March 2020, in response to the COVID-19 pandemic, principal payments and interest accrual on student loans guaranteed by the government were paused. The moratorium was extended earlier this year by President Biden to at least Sept. 30. Expiration of that moratorium would again expose defaulting borrowers to collection action. The Education Department is evaluating whether to relax the government’s stance on when borrowers should be able to discharge student loans, continuing a review started in 2018 by the Trump administration. President Biden has also considered forgiving some student-loan debt through executive action and said he would support forgiving up to $10,000 in student debt for every borrower. Read more. 

Click here to review the bill text. 

ABI’s Commission on Consumer Bankruptcy submitted a written statement for yesterday’s Senate Judiciary Committee hearing on student loan bankruptcy reform. To view the statement, please click here. 

The full Senate Judiciary Committee will be holding a hearing today at 10 a.m. EDT titled "Student Loan Bankruptcy Reform." ABI's Commission on Consumer Bankruptcy submitted a written statement for the committee's consideration as student loans and bankruptcy were the first issue addressed in its Final Report. Illinois Attorney General Kwame Raoul, Elizabeth Gonzalez of the Public Law Center, Diane Barta, Beth Akers of the American Enterprise Institute and Christopher Chapman of AccessLex Institute are scheduled to testify at the hearing. For more information on the hearing and a link to the live webcast, please click here. 

The White House said yesterday that the Centers for Disease Control and Prevention was “unable to find legal authority for a new, targeted eviction moratorium” and asked that states and local governments put in policies to keep renters in their homes, the Associated Press reported. Mass evictions could potentially worsen the recent spread of the COVID-19 delta variant as roughly 1.4 million households told the Census Bureau they could “very likely” be evicted from their rentals in the next two months. Another 2.2 million say they’re “somewhat likely” to be evicted. The prospect of mass evictions has led to criticism that the Biden administration was slow to address the end of the moratorium, which expired over the weekend. But the White House says that it lacks the authority to extend a national moratorium. That’s largely because the Supreme Court signaled in a 5-4 vote in late June that it wouldn’t back further extensions, with Justice Brett Kavanaugh writing that Congress would have to act to extend the moratorium. The White House noted that state-level efforts to stop evictions would spare a third of the country from evictions over the next month.