President Barack Obama recently urged Congress to pass laws making it easier to discharge portions of student loan debt through bankruptcy protection.
According to the Wall Street Journal, the Obama administration has filed a recommendation in a report by the Education Department and the Consumer Financial Protection Bureau that says Congress should consider modifying laws that, except in rare exceptions, prohibit the discharge of private student loans through bankruptcy.
“It would be prudent to consider whether they wish to modify the code in light of the impact on young borrowers in challenging labor-market conditions,” said bureau Chief Richard Cordray, according to the Journal.
The article goes on to say, “Private lenders warn that the suggested change could drive up interest rates, since the risk of losses would increase. They argue that bankruptcy provides too big a temptation for students to walk away from their debt obligations because, unlike homeowners, for example, many students lack major assets.”
Student loans are just one example of the types of debts that are often nondischargeable in Chapter 7 or Chapter 13 bankruptcy, although we would fully support any changes to laws making it easier for consumers with student loans to file a petition discharging the debt. In this economy, many college graduates are finding themselves without employment while trying to grapple with housing payments, credit card bills and debts, on top of high student loan payments.
This week we will discuss student loan debt, alternatives to regular payments and the benefits of bankruptcy, which allows you to discharge debts like credit card and medical bills. Visit our website for more information about the benefits of bankruptcy, or call us at (202) 483-6070 to schedule an appointment.
Law Firm of Kevin D. Judd– Washington DC and Maryland bankruptcy attorney