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The pandemic-induced recession has pushed more Americans to file for personal bankruptcy, particularly Black women, according to a report by nonprofit bankruptcy startup Upsolve, Yahoo Finance reported. The report came from a bankruptcy questionnaire of 17,000 low-income users over the past year and found that COVID-19 has pushed many to seek bankruptcy protection. "Upsolve is exactly right... Black people are overrepresented in bankruptcy and also Black women are especially overrepresented in bankruptcy," said Prof. Robert Lawless of the University of Illinois College of Law. Upsolve, which helps users file paperwork and applications for chapter 7 bankruptcy, noted a particularly sharp increase among Black users who cited the coronavirus as their reason for filing for chapter 7 bankruptcy. “It makes sense that more people are saying COVID-19 is their main reason for filing, but that number has increased for Black women at a higher rate than white women,” said Rohan Pavuluri, co-founder and CEO of Upsolve. "Those are jarring statistics." The company stressed that users generally file for bankruptcy only after exhausting all other options — including cutting back on necessities, selling or pawning possessions, and avoiding necessary medical care.

Michigan residents who are behind on their water bills could see their taps start to run dry in five days, once a state shut-off ban instituted at the height of the coronavirus pandemic expires. But Monica Lewis-Patrick said she isn’t waiting around for that to happen, the Washington Post reported. The 55-year-old Detroit-based activist leaped into action last week, purchased about 68,000 water bottles and set in motion a plan to truck them to families across the state out of a fear that other government aid may not reach them in time. “There is no policy, no safety, after March 31, from seeing massive numbers of people at risk,” said Lewis-Patrick, president of We the People of Detroit, a community advocacy organization. But the wave of potential water shut-offs in Michigan reflects a broader, national crisis in the making: Utility protections enacted in the early months of the pandemic are slated to expire in some states — including Hawaii, New York, Pennsylvania and Vermont — over the next few weeks. The looming lapses have registered new urgent alarm among congressional lawmakers and community activists nationwide, who say the Biden administration should have acted faster, and sooner, to distribute federal aid to households at risk.

Hundreds of thousands of students have borrowed directly from for-profit colleges, which have proliferated in the last decade, the New York Times reported. Unfortunately for the students, these direct-lending programs almost never come with the safeguards guaranteed by federal loans. The colleges can demand payments while students are still in school. They can withhold transcripts for nonpayment. They can impose onerous interest rates, reaching into the double digits. Schools often offer these loans because they’re required by law to have a small portion of their revenue come from sources other than federal financial aid. For-profit schools reap billions from financial aid — grants, loans and other programs that students use to help pay for college — and the legal provisions were put in place to ensure that in an industry mired by scandal and fraudulent behavior, the colleges don’t exist only to harvest federal dollars. Direct lending by for-profit schools boomed during the Great Recession, in part because private lenders stopped or curtailed what they offered, and it has spread steadily since. Without government oversight, for-profit colleges have lent at least $4 billion, and potentially much more that has gone untracked. The colleges plan for many of these loans to go unpaid — a core feature of their business models.

Millions of homeowners have been excluded from federal protections providing pandemic-related mortgage-payment relief. Now, many who have suffered setbacks during the public health emergency find their homes are at risk, MarketWatch.com reported. While homeowners with mortgages backed by the federally chartered Fannie Mae or Freddie Mac or by the federal government can qualify for up to 18 months of pandemic-related forbearance and are shielded by a foreclosure moratorium that extends through the end of June, among other protections, there’s no nationwide relief for loans that are not federally backed. The result: Non–federally backed borrowers are sometimes offered only short-term payment suspensions and relatively unaffordable repayment plans, and, in the worst cases, they’ve received no relief and lost their homes midpandemic. Their fate often depends on the identity of the loan holder. Many of these loans are held in bank portfolios, where the bank has considerable discretion to offer the type of relief it sees fit, while others are owned by smaller investors or packaged into private-label securities, where the deal documents can govern what types of relief servicers can offer to borrowers.

Citigroup Inc. on Monday advised investors to avoid bonds sold by state student loan agencies, citing the risk that more graduates will need to get temporary reprieves from their debts, Bloomberg News reported. A big buyer of the bonds disagrees. Baird Advisors, which by the end of last year owned almost $200 million of municipal bonds sold by student-loan agencies, disputed Citigroup’s view that a “lack of transparency makes it impossible” for an investor to judge the risks if growing numbers of borrowers default. Student-lending agencies in New Jersey, Missouri and Pennsylvania are among those that post quarterly loan updates and servicing reports for bondholders, said Joe Czechowicz, a portfolio manager at Baird. In addition, investors are protected from temporary cash-flow interruptions because, in most cases, the collateral for muni student-loan bonds exceeds the amount issued. “The forbearance rates are not that high and there’s enough overcollateralization that if there was an extension of one year it shouldn’t be a credit issue for any of these borrowers,” said Czechowicz, citing bonds sold by New Hampshire in February that would still be able to provide full payments if almost 40% of the loans defaulted. “If 50% of the portfolio goes into forbearance, yes, we’re going to have a completely different discussion in terms of what these student loan authorities can handle. But we’re nowhere near that.” The debate highlights how the loose disclosure rules that govern the $3.9 trillion municipal market can pose challenges to even the most astute professionals, given lighter regulations that apply to state and local debt issues.

Tens of thousands of borrowers who attended for-profit schools like Corinthian Colleges and ITT Technical Institute that defrauded students will have their student loan debts eliminated after the Education Department rescinded some changes made during the Trump administration that gutted a relief program, the New York Times reported. “Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” said Miguel Cardona, the education secretary. “We will grant them a fresh start from their debt.” The change will eliminate around $1 billion in student loan debt owed by around 72,000 borrowers, the department said. Most of them attended ITT and Corinthian, institutions that abruptly shut down years ago. The relief program, known as borrower defense, allows those who can demonstrate that they were substantially misled by their school to have their federal student loans forgiven. Once little-used, the system was flooded with claims during the Obama administration after a series of large for-profit chains collapsed following a government crackdown on schools that saddled their students with high debts for a low-quality education. For a time, the department granted any borrower with an approved claim a full discharge of their debts. But that changed under Betsy DeVos, the previous education secretary, who described the program as a “free money” giveaway. In 2019, DeVos imposed a complicated new methodology that led to only partial relief for many successful applicants. Some whose claims were approved were told they would get $0 in relief. Cardona said the department will abandon DeVos’s methodology and retroactively give those with approved claims a full discharge.

Sen. Pat Toomey (R-Pa.) yesterday blocked legislation that would prevent private debt collectors from being able to seize stimulus checks sent out under the latest coronavirus relief bill, The Hill reported. Sens. Ron Wyden (D-Ore.) and Sherrod Brown (D-Ohio) attempted to pass legislation to shield the payments from being garnished by private debt collectors. Though a previous $600 payment passed in December included the protection, the rules of reconciliation — the process Democrats used to avoid the 60-vote filibuster on the most recent bill — precluded similar language from being included into the $1.9 trillion bill. "Now Senator Brown and I wanted to include these protections in the American Rescue Plan. We wanted to include them just like was done in the December relief bill. But the problem was Senate rules don't allow Senator Brown and I to include these protections in the American Rescue Plan," Wyden said from the Senate floor. Toomey, however, objected. Under the Senate's rule any one senator can try to set up a vote or pass a bill, but any one senator can similarly object. Toomey argued that Democrats' decision to go it alone and use the process of reconciliation on coronavirus relief was the reason they couldn't get the language protecting the payments into the bill. Toomey also argued that the legislative fix supported by Wyden and Brown would prevent the money from going to individuals that a court has already determined should see the payment.

Taxpayers who already filed their 2020 returns should not amend them to take advantage of tax breaks that were created by the new $1.9 trillion pandemic relief legislation, the Internal Revenue Service commissioner, Charles Rettig, told lawmakers yesterday, saying that the I.R.S. would automatically send refunds to those who qualify, the New York Times reported. Rettig, speaking at a congressional hearing, was referring to a provision in the law that provides a tax exemption on the first $10,200 of jobless benefits collected in 2020 by unemployed workers whose households earned less than $150,000. “We believe that we will be able to automatically issue refunds associated with the $10,200,” Mr. Rettig said. According to The Century Foundation, about 40 million Americans received unemployment insurance last year. The tax changes included in the most recent stimulus bill passed earlier this month, along with tax changes in the December aid package and the rush to disburse economic impact payments, have put severe pressure on the I.R.S. The agency said on Wednesday that Tax Day would be pushed back by a month, from April 15 to May 17, to give itself and taxpayers more time to handle returns and refunds. The Treasury Department and the I.R.S. are also racing to develop new regulations and update systems to reflect other aspects of the March relief law. Treasury officials said at a briefing on Thursday that they are working with the I.R.S. to develop a new online portal to disburse advance payments for the expanded Child Tax Credit, which will provide up to $3,600 per child under age 6 and $3,000 for children ages 6 to 17, regardless of whether a family earns enough to pay income taxes.

Student loan servicing company Navient Corp. is suing the government to challenge a finding that it overcharged the Department of Education by $22.3 million, Bloomberg News reported. The department on Jan. 15 ordered Navient Jan. 15 to return the money, based on a 2009 inspector general’s probe that found that the Student Loan Marketing Association, or Sallie Mae, improperly charged the government “special allowance payments” on federal loans for which it provided collection and other services. Navient, which was spun off from Sallie Mae in 2014, sued the Education Department in federal court in Alexandria, Va., on Tuesday, calling its order “arbitrary and capricious” in violation of the law covering federal agency actions. The company claims it followed government guidance that was later reversed. It is seeking a ruling blocking the order that it turn over the $22.3 million plus attorneys fees. The suits comes as Navient’s debt-collection unit has been under fire by advocates for borrowers who have filed lawsuits across the country arguing that some types of student debt can be canceled in bankruptcy proceedings like most other debts. Navient last month beat back an attempt by three borrowers to force its debt-collection unit into bankruptcy court. The case is Navient Solutions LLC v. Department of Education, 21-cv-00324, U.S. District Court, Eastern District of Virginia (Alexandria).