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  5. Student loan bankruptcy rule may soon change

Student loan bankruptcy rule may soon change

On Behalf of Grech Legal | Apr 19, 2019 | Bankruptcy

Levels of student debt are higher than they have ever been for students and ex-students in California. However, discharging this debt in bankruptcy is nearly impossible. To help alleviate this problem, the American Bankruptcy Institute’s Commission on Consumer Bankruptcy is proposing sweeping changes to bankruptcy legislation that would make it easier for people to file. Bankruptcy law hasn’t changed since 2005 when it was made much more strict for borrowers.

The commission’s proposal is designed to give reformers ideas on how to change the bankruptcy code should they have the desire to do so. One of the most significant proposed changes would be to make student loan debt dischargeable seven years after they first become payable. Even if Congress doesn’t follow the proposal, the suggestions made by the commission could influence the way bankruptcy judges make their decisions.

Currently, borrowers can only get their student loans discharged if they can prove that the payments present an undue hardship on their finances. In courts, this is known as the Brunner Test, and very few people are able to satisfy it. Advocates are urging judges to revisit this standard to allow more people to discharge their student loans. They suggest that the standard only require student loans make it difficult to pay for regular expenses, not push a person into poverty.

Individuals who want to file for bankruptcy and have student debt could seek support and guidance from an attorney. Since it’s more difficult to get debt relief through bankruptcy now than it has been in the past, an attorney may be able to guide a client through the process. Legal counsel will help determine eligibility, file the necessary documents and negotiate with creditors.

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Matthew Grech is a debt relief agent. He helps people file for bankruptcy relief under the Bankruptcy Code.

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