Central District Bankruptcy Court Creates Program to Help Student Loan Borrowers
Student loan debt is a serious problem in the country at large and in Florida in particular. According to recent statistics, about 43 million people have student loans totaling $1.4 trillion. In Florida, 2.4 million people are carrying $85.5 billion in student loan debt. And the student loan overhang affects more than millennials. Millions of Americans in their 50s and 60s continue to owe money on student loans, decades after finishing their college degrees.
Many people quickly become overwhelmed and simply stop paying. This is a disaster, since interest and fees will continue to accrue, ballooning the amount of debt that the borrower ultimately owes.
Although most student loans cannot be discharged in bankruptcy, the bankruptcy court in the Central District of Florida has recently created a program to help debtors with student loans. According to the Orlando Sentinel the head bankruptcy judge created the program quickly to help debtors who are in Chapter 13 bankruptcy. Although the program does not currently exist in South Florida, the bankruptcy court in our district will hopefully adopt a similar program soon.
What is the Program and How Does it Help Borrowers?
Many borrowers with student loans are unaware that they have options that will allow them to pay an amount on their loans that is based on their current income. Other students have no idea how to go about applying for this type of income-based repayment.
The Middle District of Florida has created an income modification program where those debtors in Chapter 13 bankruptcy can upload their personal information to a computer program. The program will then help the debtor work out a repayment plan based on what they can afford.
This program should make it easier for those in Chapter 13 bankruptcy to stay current on their loans and also begin to chip away at the balance, which is key for ultimately getting debts paid. When a debtor simply stops paying, the debt can become so large that they will never get on top of it.
The Middle District bankruptcy court compares its new student loan program to the one it created during the Great Recession to help those underwater on their mortgage create payment plans with their lenders. That program helped around 6,000 people stave off foreclosure on their homes.
Options for Those in Southern Florida
If you are a debtor in South Florida, the program does not exist here. However, debtors still have options. If you cannot pay your student loans, you should contact your lender to discuss income-based or income-driven repayment plans, which are available for government loans. After a certain number of years, a student who has remained current on their loans can ultimately get the balanced forgiven. If you have private loans, please contact your lender to see if they have programs available.
Can Bankruptcy Help?
Although it is hard to discharge student loans in bankruptcy, wiping out other debts (like credit card debts) could free up more money to put toward your student loans. To check your options, please contact the Plantation bankruptcy attorneys at Nowack & Olson today. We are a full-service bankruptcy law firm in South Florida with offices in Miami, Plantation, and Jupiter.
Contact 888-813-4737 to schedule a free consultation.