Three U.S. Senators unveiled legislation week to reverse bankruptcy laws that make it nearly impossible to have private student loan debt discharged.
Sens. Dick Durbin (D-Ill.), Sheldon Whitehouse (D-R.I.) and Jack Reed (D-Ill.) sponsor the bill, known as the Fairness for Struggling Students Act of 2013.
In 2005, legislators passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which made private loans virtually nondischargeable during the bankruptcy process. Federal loans have not been eligible for discharge in bankruptcy since 1978.
“[In 2005], the law was unjustifiably changed to give private student loans the same privileged bankruptcy treatment as government loans, even though private student loans have vastly different terms and fewer consumer protections,” Durbin’s office said in a release. “[This] bill would restore the bankruptcy law, as it pertains to private student loans, to the language that was in place before 2005 so that privately issued student loans will once again be dischargeable in bankruptcy like nearly all other forms of private debt.”
We fully support any laws that make it easier for borrows to discharge student loans through bankruptcy. Last year, a report released by the Consumer Financial Protection Bureau (CFPB) and the U.S. Department of Education showed that student loan debt stands at more than $1 trillion dollars nationally. The report also described the unfair practices of private lenders, who often lend riskier loans to consumers and account for $150 billion of the total debt.
Just because student loan debt is nondischargeable in most cases, for people who are struggling to pay their bills on top of their loans, a Chapter 13 or Chapter 7 bankruptcy is an option. By getting rid of your dischargeable debt, you will have more income to make your student loan payments.
If you have questions about the bankruptcy process and student loans, contact our Washington DC and Maryland bankruptcy lawyer now for a free consultation.