Bill would change how some student debt is treated in bankruptcy
Bankruptcy can have many benefits for individuals who are deep in debt. One is that a person may be able to get quite a bit of debt discharged in a bankruptcy. An important thing to note though is that there are some kinds of debt that are, generally, non-dischargeable in bankruptcy. One such kind of debt is student loan debt.
Under current federal law, getting student loan debt discharged in a bankruptcy, whether it be private student loan debt or debt regarding government-issued student loans, is extremely difficult. A bill that was recently introduced to Congress proposes changing this when it comes to private student loan debt.
The bill would change the way private student loan debt is treated in bankruptcy so that some of the major roadblocks to getting such debt discharged in a bankruptcy would be removed. Thus, the bill, if passed, could potentially make getting private student loan debt discharged a much more realistic possibility for individuals who are going into a bankruptcy with this type of debt.
As a note, the bill would only change things for private student loans, which make up around 10 percent of all student loans. For the rest of student loans, federal-government-issued student loans, things would remain the same and bankruptcy discharges for debt on such loans would remain very hard to get.
The bill’s chances of passing are thought to be rather slim.
Do you think that the federal government should change the way private student loan debt is treated in bankruptcy? Do you think making bankruptcy discharges more of a possibility for private student loan debt would be of great help to those struggling with student loan debt? Would you like to see Congress pass the bill?
An important thing to note is that, even if bankruptcy discharges remain a near-impossibility for student loan debt, this does not mean that those struggling with student loan debt have no avenues for debt relief. For example, even without a discharge of student loan debt, a bankruptcy, in certain circumstances, could provide significant help to a person with high student loan debt. Also, other debt relief options can sometimes prove useful to a person in such a situation. Thus, speaking with a lawyer about options for debt relief can be a good idea for those who have overwhelming levels of student loan debt.