NO MORE LOAN SHARKS ?

North Carolina Attorney General Josh Stein urged Congress to rescind the so-called True Lender rule, which allows predatory lenders to evade state usury laws and take advantage of people.

“I’ve already gone to court to prevent loan sharks from coming back into our state and taking advantage of North Carolinians, and now I urge Congress to take action to protect people from predatory lenders,” said Attorney General Josh Stein. “We need every tool at our disposal to uphold state law and stop them from coming back into our state.”

The bipartisan coalition of 25 attorneys general are calling for Congress to use the Congressional Review Act to rescind the rule from the Office of the Comptroller of the Currency (OCC). Through the rule, predatory lenders circumvent state interest rate caps through “rent-a-bank” schemes. Banks act as lenders in name only, passing along their state law exemptions to non-bank payday lenders. These arrangements would allow lenders to charge consumers rates that far exceed the rates permissible under North Carolina consumer protection laws.

Under the federal National Bank Act, national banks that are licensed and regulated by the Office of the Comptroller of the Currency (OCC) can charge interest on loans at the maximum rate permitted by their “home” state, even when that interest rate exceeds the 30 percent interest rate limit in North Carolina. National banks have this privilege because they are subject to extensive federal oversight and supervision. For years, non-bank entities such as payday, auto title, and installment lenders have attempted to partner with national banks to exploit these exemptions to offer ultra-high-rate loans in states where such loans are forbidden.

Courts have previously concluded that these non-bank lenders are not the “true lender” of the loan and must follow state interest rate limits. However, the so-called True Lender rule prevents courts from intervening if a national bank is either named as the lender on loan documents or the bank initially “funds” the loan. The rule also fails to require the bank to take any meaningful risk and is a departure from decades of OCC policy.

NC Attorney General Stein previously led a coalition of 24 states objecting to the rule when it was initially proposed by the Trump Administration and sued to stop its implementation in January. However, Congress can pass pending resolutions to repeal the rule and save years of litigation and more quickly protect people.

North Carolina Attorney General Stein is joined in sending this letter by the Attorneys General of Arkansas, California, Colorado, Connecticut, District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, South Dakota, Vermont, Virginia, and Wisconsin.

NO MORE LOAN SHARKS

NORTH CAROLINA Attorney General Josh Stein has asked Congress to rescind the so-called True Lender rule, which allows predatory lenders to evade state usury laws and take advantage of people.

“I’ve already gone to court to prevent loan sharks from coming back into our state and taking advantage of North Carolinians, and now I urge Congress to take action to protect people from predatory lenders,” said Attorney General Josh Stein. “We need every tool at our disposal to uphold state law and stop them from coming back into our state.”

The bipartisan coalition of 25 attorneys general are calling for Congress to use the Congressional Review Act to rescind the rule from the Office of the Comptroller of the Currency (OCC). Through the rule, predatory lenders circumvent state interest rate caps through “rent-a-bank” schemes. Banks act as lenders in name only, passing along their state law exemptions to non-bank payday lenders. These arrangements would allow lenders to charge consumers rates that far exceed the rates permissible under North Carolina consumer protection laws.

Under the federal National Bank Act, national banks that are licensed and regulated by the Office of the Comptroller of the Currency (OCC) can charge interest on loans at the maximum rate permitted by their “home” state, even when that interest rate exceeds the 30 percent interest rate limit in North Carolina.

National banks have this privilege because they are subject to extensive federal oversight and supervision. For years, non-bank entities such as payday, auto title, and installment lenders have attempted to partner with national banks to exploit these exemptions to offer ultra-high-rate loans in states where such loans are forbidden.

Courts have previously concluded that these non-bank lenders are not the “true lender” of the loan and must follow state interest rate limits. However, the so-called True Lender rule prevents courts from intervening if a national bank is either named as the lender on loan documents or the bank initially “funds” the loan. The rule also fails to require the bank to take any meaningful risk and is a departure from decades of OCC policy.

NC Attorney General Stein is joined in sending this letter by the Attorneys General of Arkansas, California, Colorado, Connecticut, District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, South Dakota, Vermont, Virginia, and Wisconsin.

STOP LOAN SHARKS

The North Carolina Attorney General has urged Congress to rescind the so-called True Lender rule, which allows predatory lenders to evade state usury laws and take advantage of people.

“I’ve already gone to court to prevent loan sharks from coming back into our state and taking advantage of North Carolinians, and now I urge Congress to take action to protect people from predatory lenders,” said NC Attorney General Josh Stein. “We need every tool at our disposal to uphold state law and stop them from coming back into our state.”

The bipartisan coalition of 25 attorneys general are calling for Congress to use the Congressional Review Act to rescind the rule from the Office of the Comptroller of the Currency (OCC). Through the rule, predatory lenders circumvent state interest rate caps through “rent-a-bank” schemes. Banks act as lenders in name only, passing along their state law exemptions to non-bank payday lenders. These arrangements would allow lenders to charge consumers rates that far exceed the rates permissible under North Carolina consumer protection laws.

Under the federal National Bank Act, national banks that are licensed and regulated by the Office of the Comptroller of the Currency (OCC) can charge interest on loans at the maximum rate permitted by their “home” state, even when that interest rate exceeds the 30 percent interest rate limit in North Carolina. National banks have this privilege because they are subject to extensive federal oversight and supervision. For years, non-bank entities such as payday, auto title, and installment lenders have attempted to partner with national banks to exploit these exemptions to offer ultra-high-rate loans in states where such loans are forbidden.

Courts have previously concluded that these non-bank lenders are not the “true lender” of the loan and must follow state interest rate limits. However, the so-called True Lender rule prevents courts from intervening if a national bank is either named as the lender on loan documents or the bank initially “funds” the loan. The rule also fails to require the bank to take any meaningful risk and is a departure from decades of OCC policy.

North Carolina Attorney General Stein is joined in sending this letter by the Attorneys General of Arkansas, California, Colorado, Connecticut, District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, South Dakota, Vermont, Virginia, and Wisconsin.

Opinion: Why bankruptcy must be an option for homeowners and small businesses to survive this COVID-19 recession

The U.S. Bankruptcy Code should be overhauled to protect families and savings

Few Americans are unaffected by the recession and economic turmoil COVID-19 has wrought, with unemployment numbers spiking to Great Depression levels and millions in need of temporary benefits such as mortgage forbearance or expanded unemployment insurance. With no obvious end to the pandemic in sight, it’s increasingly clear that many Americans are sitting on a ticking financial time bomb.

If the U.S. is to avoid a disastrous repeat of the Great Recession, there must be a determined response from government. What Americans need now is a substantial overhaul of the U.S. Bankruptcy Code. Without this lifeline, millions of Americans could lose their homes, igniting a chain reaction that will slow the recovery and cripple the U.S. economy for years to come.

So far, efforts by federal and state governments to provide relief to Americans blindsided by COVID-19 have helped to stanch the bleeding. But for many, these measures have come too little, too late. Despite more than 16 million people being unemployed, efforts to pass a second federal aid package have stalled, creating the real possibility that the lack of progress from politicians will accelerate the speed and size of the bankruptcy wave — a wave that would surpass the 2008 economic downtown, and possibly become the worst financial crisis of our lifetime.

The numbers are bleak — currently non-housing debt totals more than $14 trillion and more than 7% of residential mortgages are delinquent. This means millions of people can no longer meet their debt obligations, given the size and scope of this pandemic.

Far from being a way to escape financial obligations, bankruptcy is a key part of the social safety net for those who have been dealt a bad hand — and you’d be hard-pressed to find a worse hand than COVID-19. Bankruptcy is a vital and even necessary means for honest people struggling with finances to obtain relief.

The most common causes of personal bankruptcy include job loss, medical problems and divorce. In this current crisis, bankruptcy may truly be the only real solution for many families and small business owners who never dreamed they would need it. It should be seen as integral to surviving the recession for some Americans as unemployment insurance, loan forbearance, Paycheck Protection Program (PPP) loans, and other relief measures.

Yet the U.S. Bankruptcy Code has not evolved to address today’s global crises. Whatever Congress’ intentions might have been in passing the Bankruptcy Abuse Prevention Consumer Protection Act (BAPCPA) of 2005, it is clear they did not anticipate the seismic economic shocks that Americans have experienced since then. Accordingly, there remain substantial barriers to accessing bankruptcy relief that make a quick and meaningful recovery unavailable to many families.

In May of this year, the House of Representatives took an important step toward reversing this obstacle when it passed H.R. 6800, also known as the “HEROES Act.” The bill includes provisions that would provide critical relief to those burdened by the impact of COVID-19.

For example, it would increase the homestead exemption floor so that debtors forced to file bankruptcy as a result of the pandemic do not lose their homes due to a financial disaster that is far beyond their control. The legislation would protect debtors from having their COVID-19-related benefits, often the only resource standing between them and deprivation, seized by trustees during the bankruptcy process. And it would dramatically expand access to and effectiveness of Chapter 13 bankruptcy by raising debt limits for filing and providing more flexible options for discharging debts or extending repayment plans.

This legislation is a move in the right direction. It now falls to the Senate to craft a companion bill that goes the distance to relieve debtors and provide a light at the end of the tunnel. There is more that can be done, including giving Chapter 13 debtors options to deal with mortgage payments when there has been forbearance on those payments, as well as expanding provisions for relief from onerous student loan debts. One thing is clear: doing nothing is not an option.

Without decisive action, Americans who have lost jobs or businesses through catastrophes beyond their control will be mired in crippling debt they cannot repay. They will not soon return to the earning, spending and investing behavior that will be essential for America’s recovery. The long-term health and competitiveness of the U.S. economy will suffer for this mistake.

Bankruptcy reform is the fresh start — and the economic kick-start — we desperately need. It’s a solution with bipartisan appeal, and with the pandemic not likely to end anytime soon, it’s time for Congress and the Trump administration to come together to make this a priority.

John C. Colwell is president of the National Association of Consumer Bankruptcy Attorneys.

Opinion: Why bankruptcy must be an option for homeowners and small businesses to survive this COVID-19 recession

U.S. Bankruptcy Code should be overhauled to protect families and savings

Few Americans are unaffected by the recession and economic turmoil COVID-19 has wrought, with unemployment numbers spiking to Great Depression levels and millions in need of temporary benefits such as mortgage forbearance or expanded unemployment insurance. With no obvious end to the pandemic in sight, it’s increasingly clear that many Americans are sitting on a ticking financial time bomb.

If the U.S. is to avoid a disastrous repeat of the Great Recession, there must be a determined response from government. What Americans need now is a substantial overhaul of the U.S. Bankruptcy Code. Without this lifeline, millions of Americans could lose their homes, igniting a chain reaction that will slow the recovery and cripple the U.S. economy for years to come.

So far, efforts by federal and state governments to provide relief to Americans blindsided by COVID-19 have helped to stanch the bleeding. But for many, these measures have come too little, too late. Despite more than 16 million people being unemployed, efforts to pass a second federal aid package have stalled, creating the real possibility that the lack of progress from politicians will accelerate the speed and size of the bankruptcy wave — a wave that would surpass the 2008 economic downtown, and possibly become the worst financial crisis of our lifetime.

The numbers are bleak — currently non-housing debt totals more than $14 trillion and more than 7% of residential mortgages are delinquent. This means millions of people can no longer meet their debt obligations, given the size and scope of this pandemic.

Far from being a way to escape financial obligations, bankruptcy is a key part of the social safety net for those who have been dealt a bad hand — and you’d be hard-pressed to find a worse hand than COVID-19. Bankruptcy is a vital and even necessary means for honest people struggling with finances to obtain relief.

The most common causes of personal bankruptcy include job loss, medical problems and divorce. In this current crisis, bankruptcy may truly be the only real solution for many families and small business owners who never dreamed they would need it. It should be seen as integral to surviving the recession for some Americans as unemployment insurance, loan forbearance, Paycheck Protection Program (PPP) loans, and other relief measures.

Yet the U.S. Bankruptcy Code has not evolved to address today’s global crises. Whatever Congress’ intentions might have been in passing the Bankruptcy Abuse Prevention Consumer Protection Act (BAPCPA) of 2005, it is clear they did not anticipate the seismic economic shocks that Americans have experienced since then. Accordingly, there remain substantial barriers to accessing bankruptcy relief that make a quick and meaningful recovery unavailable to many families.

In May of this year, the House of Representatives took an important step toward reversing this obstacle when it passed H.R. 6800, also known as the “HEROES Act.” The bill includes provisions that would provide critical relief to those burdened by the impact of COVID-19.

For example, it would increase the homestead exemption floor so that debtors forced to file bankruptcy as a result of the pandemic do not lose their homes due to a financial disaster that is far beyond their control. The legislation would protect debtors from having their COVID-19-related benefits, often the only resource standing between them and deprivation, seized by trustees during the bankruptcy process. And it would dramatically expand access to and effectiveness of Chapter 13 bankruptcy by raising debt limits for filing and providing more flexible options for discharging debts or extending repayment plans.

This legislation is a move in the right direction. It now falls to the Senate to craft a companion bill that goes the distance to relieve debtors and provide a light at the end of the tunnel. There is more that can be done, including giving Chapter 13 debtors options to deal with mortgage payments when there has been forbearance on those payments, as well as expanding provisions for relief from onerous student loan debts. One thing is clear: doing nothing is not an option.

Without decisive action, Americans who have lost jobs or businesses through catastrophes beyond their control will be mired in crippling debt they cannot repay. They will not soon return to the earning, spending and investing behavior that will be essential for America’s recovery. The long-term health and competitiveness of the U.S. economy will suffer for this mistake.

Bankruptcy reform is the fresh start — and the economic kick-start — we desperately need. It’s a solution with bipartisan appeal, and with the pandemic not likely to end anytime soon, it’s time for Congress and the Trump administration to come together to make this a priority.

John C. Colwell is president of the National Association of Consumer Bankruptcy Attorneys.

The Most Significant Change to the Bankruptcy Code in 40 Years

PLEASE NOTE:

THIS LEGISLATION BELOW IS ONLY PROPOSED AND HAS NOT BEEN PASSED BY CONGRESS.  PLEASE CONTACT YOUR UNITED STATES SENATORS, RICHARD BURR AND THOM TILLIS TO VOICE YOUR SUPPORT FOR THIS LEGISLATION. PLEASE ALSO CONTACT YOUR LOCAL REPRESENTATIVE OF THE UNITED HOUSE OF REPRESENTATIVES:

 

UNITED STATES SENATORS (2 for each state):

https://www.burr.senate.gov/contact/email 

https://www.tillis.senate.gov/public/index.cfm/email-me

 

FIND YOUR UNITED STATES REPRESENTATIVE (one for each district):

https://www.house.gov/representatives/find-your-representative 

 

 

Consumer Bankruptcy Reform Act of 2020

On December 9, 2020 United States Senator Elizabeth Warren (D-Mass.) and House Judiciary Committee Chairman Jerrold Nadler (D-N.Y.) introduced the Consumer Bankruptcy Reform Act of 2020, bicameral legislation to simplify and modernize the consumer bankruptcy system to make it easier for individuals and families forced into bankruptcy to get back on their feet.

The Consumer Bankruptcy Reform Act will make significant changes to the Bankruptcy Code. Among other amendments it will:

• Replace chapter 7 and chapter 13 bankruptcies with a single system.
• Allow for discharge of student loans.
• Allow discharge before completion of payment plans.
• Choice of state or new federal exemptions which includes new homestead floor.
• Assist renters with back rent avoid eviction.
• Allow discharge of local government fines.
• Exempt sources of income and assets traceable to alimony, child support income, the child tax credit, and the Earned Income Tax Credit (EITC).
• Crack down on predatory practices and hold corporate wrongdoers accountable by banning collection of debts that violate consumer protection laws, allowing lawsuits against creditors that attempt to collect previously discharged debt, and preventing creditors from pursuing consumers in mandatory arbitration.
• Allow cram-down and extended re-amortization of home mortgages
• Create a minimum federal homestead exemption

 

 

 

The members of NACBA’s Legislative Committee will discuss the major changes proposed in the Act and how they will affect consumers and attorneys. NACBA’s Legislative Committee has spent hundreds of hours reviewing the proposed changes in the Act and are ready to share their analysis with NACBA Members.

 

WSJ: Student Loan Losses Seen Costing U.S. More Than $400 Billion

The U.S. government stands to lose more than $400 billion from the federal student loan program, an internal analysis shows, approaching the size of losses incurred by banks during the subprime-mortgage crisis.

The Education Department, with the help of two private consultants, looked at $1.37 trillion in student loans held by the government at the start of the year. Their conclusion: Borrowers will pay back $935 billion in principal and interest. That would leave taxpayers on the hook for $435 billion, according to documents reviewed by The Wall Street Journal.

The analysis was based on government accounting standards and didn’t include roughly $150 billion in loans originated by private lenders and backed by the government.

The losses are far steeper than prior government projections, which typically measure how much the portfolio will cost the government in the next decade, not the entire life of the loans. Last year the Congressional Budget Office estimated that the student-loan program would cost taxpayers $31.5 billion, including administrative costs.

STUDENT LOANS ON CLIFF
Stimulus Aid Leaves Out Millions of Student-Loan Borrowers (May 4, 2020)
U.S. Student-Loan Program Now Runs Deficit, CBO Estimates (May 7, 2019)
Program to Relieve Student Debt Proves Unforgiving (May 7, 2019)
The Student-Debt Crisis Hits Hardest at Historically Black Colleges (April 17, 2019)
After decades of no-questions-asked lending, the government is realizing that it has a pile of toxic debt on its books. By comparison, private lenders lost $535 billion on subprime-mortgages during the 2008 financial crisis, according to Mark Zandi, chief economist at Moody’s Analytics.

The effect this time is different. The government, unlike private lenders, can borrow trillions of dollars at low rates to absorb the losses, without causing a panic. But taxpayers will end up paying a price because Congress will have to raise taxes, cut services or increase the deficit to cover the losses.

The absence of a cataclysmic event like the financial crisis is removing the impetus for the federal government to change its lending practices, which analysts said have enabled colleges to raise tuition far above the rate of inflation.

“There’s no market discipline here,” said Constantine Yannelis, a former Treasury Department official in the Obama administration who now teaches at the University of Chicago. “In 2007-2008, we saw a lot of lenders who were making risky bets going under. There’s no force like that in the student-loan market.”

The government lends more than $100 billion each year to students to cover tuition at more than 6,000 colleges and universities. It ignores factors such as credit scores and field of study, and it doesn’t analyze whether students will earn enough after graduating to cover their debt.

YOUR MONEY BRIEFING
Taxpayers On the Hook for Billions in Unpaid Student Loan Debt

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“We make no attempt to evaluate the quality of the borrower, the ability to repay, the effectiveness of the loans,” said Douglas Holtz-Eakin, former head of the Congressional Budget Office who now leads the American Action Forum, a conservative think tank. “The taxpayer ends up picking up the tab.”

Borrowers with subprime credit scores—indicating they have had previous trouble paying off debt—are among the most likely to default, Federal Reserve research shows.

Between 2005 and 2016, nearly four in 10 student loans—most of them federal ones—went to borrowers with credit scores below the subprime threshold of 620, according to a Wall Street Journal analysis of data from the credit-rating firm Equifax Inc. That figure excludes borrowers who lacked credit histories. By comparison, subprime mortgages peaked at nearly 20% of all mortgage originations in 2006.

Since the financial crisis, private lenders typically originate loans only to borrowers with clean credit and require cosigners, and default rates are far lower than on federal loans.

Congressional Democrats have stepped up calls for President-elect Joe Biden to use executive action to forgive student debt. Mr. Biden, a Democrat, has reiterated his support for legislation to forgive $10,000 for each borrower with a federal student loan.

The administration of President Trump, a Republican, has opposed wide-scale debt forgiveness. But the government is already effectively forgiving debt through programs known as income-based repayment, which require borrowers to pay only 10% of their discretionary income—defined as adjusted gross income minus 150% the federal poverty line—and then forgive balances after 10, 20 or 25 years.

Worried that government accountants had underestimated losses on student loans, the Education Department under Betsy DeVos hired FI Consulting to project losses. It developed a computer model to produce a much more detailed analysis than prior government methods to value the portfolio. The accounting firm Deloitte was hired to review the model. Neither contractor responded to requests for comment.

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What do you think would be an effective way to reduce student-loan debt in the U.S.? Join the conversation below.

The consultants found that income-based repayment programs are a major driver of projected losses. Some students—particularly those in graduate schools, who unlike undergraduates face no limits on how much they can borrow for tuition—rack up big debts and then enroll in income-based repayment. Borrowers in modest-paying jobs with less debt have also used the programs to avoid default. Borrowers in income-driven repayment will repay, on average, 51% of their balances, while borrowers in other plans will repay 80%, the Education Department’s analysis shows.

It is unclear how much debt that is set to be forgiven will be interest instead of principal. Balances typically rise in income-driven repayment because the monthly payments often aren’t big enough to cover interest.

Meanwhile, millions of other borrowers continue to default on smaller amounts—typically under $10,000—after dropping out of community college or for-profit colleges. Still others say they defaulted after being defrauded by their schools and failing to land well-paying jobs in their fields of study.

Write to Josh Mitchell at joshua.mitchell@wsj.com

NACBA Joins with 65 Organizations Calling for Cancelling Student Debt to Tackle Economic Fallout

Krista D’Amelio |

WASHINGTON, D.C.- On April 13th, 69 community, civil rights, consumer, and student advocacy organizations, including NACBA, sent a letter to House and Senate leadership, urging them to include student debt cancellation in the next coronavirus package. The letter also calls on leadership to extend the suspension of payments on federal student loans through March 2021, as current estimates indicate that the economy will not recover to pre-virus levels until the third quarter of 2021.

Opinion: Why bankruptcy must be an option for homeowners and small businesses to survive this COVID-19 recession

U.S. Bankruptcy Code should be overhauled to protect families and savings
Few Americans are unaffected by the recession and economic turmoil COVID-19 has wrought, with unemployment numbers spiking to Great Depression levels and millions in need of temporary benefits such as mortgage forbearance or expanded unemployment insurance. With no obvious end to the pandemic in sight, it’s increasingly clear that many Americans are sitting on a ticking financial time bomb.

If the U.S. is to avoid a disastrous repeat of the Great Recession, there must be a determined response from government. What Americans need now is a substantial overhaul of the U.S. Bankruptcy Code. Without this lifeline, millions of Americans could lose their homes, igniting a chain reaction that will slow the recovery and cripple the U.S. economy for years to come.

So far, efforts by federal and state governments to provide relief to Americans blindsided by COVID-19 have helped to stanch the bleeding. But for many, these measures have come too little, too late. Despite more than 16 million people being unemployed, efforts to pass a second federal aid package have stalled, creating the real possibility that the lack of progress from politicians will accelerate the speed and size of the bankruptcy wave — a wave that would surpass the 2008 economic downtown, and possibly become the worst financial crisis of our lifetime.

The numbers are bleak — currently non-housing debt totals more than $14 trillion and more than 7% of residential mortgages are delinquent. This means millions of people can no longer meet their debt obligations, given the size and scope of this pandemic.

Far from being a way to escape financial obligations, bankruptcy is a key part of the social safety net for those who have been dealt a bad hand — and you’d be hard-pressed to find a worse hand than COVID-19. Bankruptcy is a vital and even necessary means for honest people struggling with finances to obtain relief.

The most common causes of personal bankruptcy include job loss, medical problems and divorce. In this current crisis, bankruptcy may truly be the only real solution for many families and small business owners who never dreamed they would need it. It should be seen as integral to surviving the recession for some Americans as unemployment insurance, loan forbearance, Paycheck Protection Program (PPP) loans, and other relief measures.

Yet the U.S. Bankruptcy Code has not evolved to address today’s global crises. Whatever Congress’ intentions might have been in passing the Bankruptcy Abuse Prevention Consumer Protection Act (BAPCPA) of 2005, it is clear they did not anticipate the seismic economic shocks that Americans have experienced since then. Accordingly, there remain substantial barriers to accessing bankruptcy relief that make a quick and meaningful recovery unavailable to many families.

In May of this year, the House of Representatives took an important step toward reversing this obstacle when it passed H.R. 6800, also known as the “HEROES Act.” The bill includes provisions that would provide critical relief to those burdened by the impact of COVID-19.

For example, it would increase the homestead exemption floor so that debtors forced to file bankruptcy as a result of the pandemic do not lose their homes due to a financial disaster that is far beyond their control. The legislation would protect debtors from having their COVID-19-related benefits, often the only resource standing between them and deprivation, seized by trustees during the bankruptcy process. And it would dramatically expand access to and effectiveness of Chapter 13 bankruptcy by raising debt limits for filing and providing more flexible options for discharging debts or extending repayment plans.

This legislation is a move in the right direction. It now falls to the Senate to craft a companion bill that goes the distance to relieve debtors and provide a light at the end of the tunnel. There is more that can be done, including giving Chapter 13 debtors options to deal with mortgage payments when there has been forbearance on those payments, as well as expanding provisions for relief from onerous student loan debts. One thing is clear: doing nothing is not an option.

Without decisive action, Americans who have lost jobs or businesses through catastrophes beyond their control will be mired in crippling debt they cannot repay. They will not soon return to the earning, spending and investing behavior that will be essential for America’s recovery. The long-term health and competitiveness of the U.S. economy will suffer for this mistake.

Bankruptcy reform is the fresh start — and the economic kick-start — we desperately need. It’s a solution with bipartisan appeal, and with the pandemic not likely to end anytime soon, it’s time for Congress and the Trump administration to come together to make this a priority.

John C. Colwell is president of the National Association of Consumer Bankruptcy Attorneys.

Read the article on MarketWatch