Congressman Introduces Bill to Allow Discharge of Student Loan Debt in Bankruptcy
As tuition has increased at colleges across the country, student loan debt has been mounting as well. According to the Institute for College Access & Success, 69% of the class of 2013 graduated with student loan debt at an average of $28,400 per graduate. Many people struggle to pay off their student loans and simply find themselves incapable of doing so. Unfortunately, student loan debt is one of about 18 different types of debt which are specifically excluded from discharge in bankruptcy.
H.R. 449, the Discharge Student Loans in Bankruptcy Act, would change that law. This bill, introduced into Congress by Representative John Delaney, D-Md, would amend 11 U.S.C. 523(a) by deleting the paragraph which currently makes student loan debt nondischargeable. As an unsecured debt, a student loan could then be reduced or discharged in a Chapter 7 or Chapter 13 bankruptcy like credit card bills, medical bills and other unsecured debt.
Representative Delaney appeals to “basic fairness in the law” in his proposal. “It doesn’t make sense for students with heavy debt burdens to be worse than someone with credit card, auto loan debt or mortgage debt,” he is quoted as saying.
H.R. 449 was introduced into the House of Representatives on January 21st and referred to the House Committee on the Judiciary.
Student Loan Debt Can Sometimes be Discharged Under Current Law
There is a common misconception that no student loans can be discharged in bankruptcy, but this is not entirely true. It is possible to discharge either federal or private student loan debt in a Chapter 7 or Chapter 13 by showing that being required to repay the loan would cause an undue hardship. Make no mistake, however, that this is a difficult burden to overcome and generally requires filing an adversary proceeding against the lender in court. If your student loan debt is so high that you cannot pay it off and maintain a minimal standard of living, you might be able to receive a discharge of this debt. Even if not discharged, bankruptcy may still help by freeing up some disposable income or merging the loan into a practical repayment plan. Talk to an experienced bankruptcy attorney about whether bankruptcy can help you in your situation. In Bowling Green and Warren County, contact Lanna Martin Kilgore for assistance.