At this time education loans are not dischargeable during bankruptcy cases except in extreme circumstances. Under the US Bankruptcy Code at 11 USC 523(a)(8) borrowers who want to get a bankruptcy discharge for their student loans must demonstrate in an adversary proceeding that repaying their student loans “would impose an undue hardship on the debtor and the debtor’s dependents.” This is an extremely difficult requirement to fulfill and many bankruptcy lawyers don’t even attempt it.
But as of April individuals who have taken out private student loans may be given a way out if they are experiencing economic difficulties. The “Private Student Loan Bankruptcy Fairness Act of 2010” would make it possible for students to terminate their private student loan debts if they declare bankruptcy.
Senators Al Franken (D-MN), Dick Durbin (D-IL), and Sheldon Whitehouse (D-RI) presented the Fairness for Struggling Students Act (S.3219) in the US Senate on April 15, 2010. Congressmen Steve Cohen (D-TN) and Danny Davis (D-IL) presented the Private Student Loan Bankruptcy Fairness Act of 2010 (H.R. 5043) in the US House of Representatives on the same day.
Senator Durbin stated that the Fairness for Struggling Students Act is a step toward “restoring fairness in student lending by treating privately issued student loans in bankruptcy the same way other types of private debt are treated.” He also pointed out that a major goal of the legislation is to “give students who find themselves in dire financial straits a chance at a new beginning.”
“This bill will help to ensure that people who seek higher education to better their futures are not dissuaded from doing so by the threat of financial ruin,” Rep. Steve Cohen said in his address to a committee when presenting the Private Student Loan Bankruptcy Fairness Act of 2010.
If you have any questions, please feel free to contact me. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form. I will answer them with no obligation. I am here to help.
[...] an interesting article by Ron Lieber discussing the student loan situation that I wrote about in yesterday’s blog. Mr. Lieber points out that individuals who overextend themselves economically by purchasing luxury [...]