Bankruptcy Filing For Student Loans: Would It Be Possible?
Often it can be noticed that students have filed for bankruptcy with debt consolidation attorneys in OKC and the reason being is their student loan. According to a report in 2017 published by the Consumer Financial Protection Bureau, 44 million student debt borrowers and there is about $1.4 trillion in outstanding debts. It is enough to demonstrate the burden on students to pay back their loans.
A few years ago, the court did not allow bankruptcy for student loans, but there were instances where the court discharged the student loan. It is obvious when the loan is discharged, there wouldn’t be any amount to repay. The HIGHER ED Act that was introduced recently by Democratic Congressman Peter DeFazio from Oregon, will make significant changes in the bankruptcy rules.
Just this year, the Department of Education has issued a request to collect data and feedback on the decision. The reason was to know whether it is required to modify undue-hardship claims under the bankruptcy evaluation.
According to the National Consumer Law Center, most of the federal courts except the 1st U.S. Circuit Court in Boston and the 8th U.S. Circuit Court in St. Louis have adopted the idea of Brunner Test in order to define undue hardship. Under this, it is imperative for students to prove that:
● They cannot maintain a basic standard of living while paying the loan back.
● Their financial issues cannot be stabilized in the coming years.
● The students have made an effort to repay their loan.
The student borrower, when applying for bankruptcy, has to prove that they are under severe financial hardship and not able to support themselves or their family, with little hope for improvement of the scenario. The debt consolidation attorneys in OKC can guide students in this situation.
The Department of Education is evaluating and reviewing this criteria so that they can come up with some guidelines on when a student is classified as facing undue hardship. It is also under review if a loan-discharge can be made more accessible for the needy students.
On the contrary to these ideas, there is another possibility that could come from this initiative. It would be easier for students to get discharged from the loan amount and they might lose interest of repaying it. The debt consolidation attorneys in OKC support the change stating the fact that the struggle to repay loans is quite heavy for students.
It is expected that the change will take place in sectors of undue hardship for student borrowers and the students would be able to file for bankruptcy including for student’s loans.
** Disclaimer: This blog post does not constitute legal advice, nor does it create a client-attorney relationship.