%1

Total 2016 U.S. personal bankruptcy filings are positioned to fall for a sixth consecutive year, according to a Fitch Ratings report released yesterday. Fitch projects personal bankruptcies to decline by roughly 6-8 percent, with stable unemployment levels, sustained consumer discipline and continued price growth in the housing sector driving the decline. “The labor market remains steady, consumer confidence is up and gas prices figure to stay low for the foreseeable future, which should help keep personal bankruptcy filings trending lower,” said Director Herman Poon. Lower initial jobless claims and continued improvement in unemployment drove further the decline in consumer filings, falling 10.2 percent year over year in 2015. While consumers continued to borrow last year thanks to higher consumer confidence levels, overall macro conditions have generally supported the lower trend. The contraction in personal bankruptcy filings helped generate positive improvement in ABS collateral performance in 2015, with credit card delinquencies and chargeoffs hovering at or near record lows for much of the year.

Student Aid Center Inc. filed for bankruptcy last week, claiming between $500,001 and $1 million in assets and between $1,000,001 and $10 million in estimated liabilities, MarketWatch.com reported on Friday. The company is part of a burgeoning industry of student debt-relief firms that regulators have accused of preying on borrowers desperate for help with their student loans. The companies use social media and other forms of advertising, often implying an affiliation with the Department of Education, to lure borrowers into paying high fees to enroll in government programs they could take advantage of for free, consumer advocates say. The Consumer Financial Protection Bureau and states attorneys general have filed lawsuits against some of these companies, accusing them of violating consumer protection laws. Student Aid Center’s bankruptcy comes several months after Minnesota Attorney General Lori Swanson filed a lawsuit against the company, accusing the firm of misrepresenting itself to borrowers by telling them it could help them qualify for loan forgiveness programs, that it would “take over” or pay borrowers’ loans and by lying about the amount that at loan would drop with the help of their services. In addition, the company charged between $500 and $1,500 to sign borrowers up with government programs they could otherwise access for free, Swanson’s suit claims. Read more. 

To read more about bankruptcy and student loan debt, be sure to pick up a copy of ABI’s Graduating with Debt: Student Loans under the Bankruptcy Code. 

The Supreme Court on Monday turned away an appeal that sought to make it easier to erase student loans in bankruptcy, sidestepping an issue that has become a focal point for consumer advocates and lawmakers as millions of borrowers fall behind on their payments, Dow Jones Daily Bankruptcy Review reported today. The court, in a brief written order, said that it wouldn't consider an appeal by an unemployed Wisconsin man who owes more than $260,000 in student-loan debt from business and law school. Mark Tetzlaff said in court papers his alcoholism, depression and criminal record have prevented him from finding a job and repaying his debt. He also twice failed the bar exam. Read more. (Subscription required.) 

To read more about bankruptcy and student loan debt, be sure to pick up a copy of ABI’s Graduating with Debt: Student Loans under the Bankruptcy Code.