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Sen. Elizabeth Warren (D-Mass.) is right that we need to address the skyrocketing tuition costs at American universities, but complete student-loan debt forgiveness is not the solution, according to a Wall Street Journal commentary. Most college students will generate enough income over time to repay their student debt, and will also quickly earn more than their non-college-attending peers. Forgiving student debt, then, would in many cases help the relatively well-off become even more well-off. Sen. Warren’s proposal calls for canceling $50,000 of debt for those with annual household incomes under $100,000, and providing “substantial debt cancellation” for people whose households earn between $100,000 and $250,000 a year. A real solution to rising tuition costs would have to be long-term and address the overemphasis that American society places on the four-year degree, according to the commentary. Read the full commentary. (Subscription required.) 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

The issue of student loan debt in bankruptcy is addressed in recommendations of the Final Report of ABI’s Commission on Consumer Bankruptcy. To download a copy of the report, please click here.

Former Victoria’s Secret Angel model Erin Heatherton has filed for bankruptcy, Miami.com reported. Court documents show that the six foot tall model said her average monthly income is $1,089.91 but her expenses are $1,074. She listed only $919 in her checking account. The 30-year-old has fallen on hard times in her industry since 2017, when she made $226,596. The Illinois native listed her income as $18,000 in 2018, and just $2,820 so far this year. Her court documents show she currently owes a $215,601.49 on three separate credit cards, as well as $100,000 from a lawsuit with a former business partner and $41,000 in back taxes to the State of New York. Heatherton, an ex-girlfriend of Leonardo DiCaprio, was discovered during a vacation to Miami when she was 17, she told the Miami Herald during a 2012 interview.

The House Financial Services Subcommittee on Consumer Protection and Financial Institutions will hold a hearing today at 2 p.m. EDT titled "Ending Debt Traps in the Payday and Small Dollar Credit Industry." Click here to access the live webstream of the hearing, copies of draft legislation to be considered and the witness list.

Two New York City marshals whose work collecting debts for predatory lenders is continuing to make them millionaires, Bloomberg News reported. Vadim Barbarovich, who already had the most lucrative city job in 2017, made 11 percent more last year, earning $1.9 million, according to documents released in response to a public-records request. His main competitor in collections work for the cash-advance industry, Stephen Biegel, almost doubled his take to $1.4 million. The two marshals were the subjects of a Bloomberg News article in November detailing how they collect debts from small-business owners across the country by seizing cash from bank accounts and pocketing a share for themselves, often stretching the limits of their jurisdiction. The article prompted Mayor Bill de Blasio to declare that “the entire model needs a new look.” Five months later, the only sign of change is the steady climb in marshals’ earnings.“The marshals haven’t been deterred one bit,” said Shane Heskin, a lawyer who represents borrowers and has filed complaints against Barbarovich and Biegel. The New York Department of Investigation, which oversees the city’s 35 marshals, said that it has “been in touch with City Hall” but wouldn’t say whether any policy changes were in the works. Diane Struzzi, a spokeswoman for the agency, said an investigation of Barbarovich, disclosed last year, still hadn’t been completed. She declined to comment about whether any marshals had been disciplined recently for overstepping their jurisdiction. De Blasio didn’t reappoint Barbarovich when his five-year term expired in November, but he’s allowing him to remain on the job. The mayor’s office had no comment, and Barbarovich and Biegel didn’t respond to requests for comment.

The Supreme Court heard oral argument yesterday in Taggart v. Lorenzen, 18-489 (Sup. Ct.), to decide whether a good faith belief that a debt was not discharged precludes holding the creditor in civil contempt, according to an analysis by ABI's Bill Rochelle. The Court will choose among three tests, one proposed by the debtor, one by the U.S. Solicitor General and another by the creditor. Not surprisingly, the debtor argued for strict liability where the creditor’s good faith is no defense. The Solicitor General proposed a purely objective test but said the government would go along with the creditor’s objective test that also considers good faith.

A federal appeals court in New York yesterday cleared the way for consumer advocates to sue for injunctions barring officers of Native American tribes from engaging in alleged predatory-lending practices, WSJ Pro Bankruptcy reported. The decision came in the case of Think Finance Inc., an alleged payday lender that resorted to bankruptcy after being sued over “rent-a-tribe,” practices, in which an otherwise illegal business uses a Native American tribe as a front. Defenders of the practice say that U.S. and state laws don’t apply to tribes due to their sovereign national status. Consumer advocates say the tribes aren’t really doing the lending, and they also aren’t getting much of the money generated by high-interest-rate loans sold to consumers online. Wednesday’s appellate court ruling said that Native American tribal sovereign immunity doesn’t provide a shield against laws designed to protect consumers against predatory lending practices. Read more. 

A forthcoming podcast between ABI Editor-at-Large Bill Rochelle and Prof. Jack Williams examines some of the issues related to tribal sovereignty and bankruptcy.

Homeowners in Chicago cheated by a mortgage fraud scheme are seeking to form a committee to protect their interests in the bankruptcy of Ditech Holding Corp., the company that owns their loans, Bloomberg News reported. The Investor Protection Center at the Northwestern Pritzker School of Law filed a request for the creation of a committee of consumer creditors to represent borrowers who were victims of the scheme. The fraud targeted elderly African-American homeowners and coerced them into reverse mortgages with no benefits that left some in foreclosure, the filing states. Ditech, the mortgage lender and servicer led by Tom Marano, filed for bankruptcy in February and has proposed a plan to restructure its debt that would release it from liabilities such as lawsuits filed by consumer borrowers. J. Samuel Tenenbaum, a professor of law at Northwestern, said the homeowners he helps represent will be harmed by such a release of liabilities. The center’s clients “are elderly, disabled, and lack the financial means to obtain representation, are the most vulnerable and at risk of harm in Ditech bankruptcy matters," Tenenbaum, who is the director of the Northwestern’s Complex Civil Litigation and Investor Protection Center, wrote in the filing on Friday.