The U.S. Supreme Court on Monday overturned a lower court ruling that struck down a state law that limited the ability of states to recover debts owed to private lenders.
The court said in its decision that the laws are not preempted by the Constitution and said states should not be limited in their ability to recover money from private lenders that owe money to the federal government.
The high court said the bankruptcy laws passed by several states last year were intended to promote the economic well-being of the people of California.
The case stems from a California law that made it a crime to offer loans to a debtor in default.
The state has sought to recover the debt through a class-action lawsuit filed by several individuals who say the law unfairly penalizes the poor.
California has said it was never intended to penalize anyone for defaulting on a loan.
The ruling comes as the nation’s economy struggles to recover from the Great Recession, the worst financial crisis since the 1930s.