New Legislation to Discharge Student Loans in Bankruptcy


The new Congress took office earlier this month and there is already a bill introduced to allow student loan debt to be discharged in bankruptcy.

In a previous article, I wrote how student loans can be discharged under the current bankruptcy laws, however, it is extremely difficult to do.

Discharge of Student Loans in Bankruptcy Act of 2015

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Discharge Student Loan Act of 2015

The language of H.R. 449, introduced on January 21, 2015, is really interesting. It provides for a complete discharge of student loan debt without the need to establish undue burden or any other factors.

The most interesting part of the bill is that, if passed, it will apply only to cases commenced “on or after the date of the enactment of this Act”. This effectively denies a discharge of student loan debt for anyone who has filed for bankruptcy within the last few years because of the bar on subsequent bankruptcy filings for a certain period of time depending on the type of bankruptcy filed.

It appears on the face of the legislation that debtors can conclude their education and right before that first student loan payment is due, a bankruptcy can be filed discharging that obligation.

Conclusion

Ultimately, I don’t believe this legislation will pass. At the very least, it will need major revisions to pass to stop the potential loophole of discharging newly acquired student loans. Perhaps the bill could be amended to allow discharge only after the loans are 5 years old, or debtor has made reasonable attempts to pay.

I will keep the reader posted on this bill as it makes it way through committee and perhaps even the floor of Congress.

Meanwhile, if you are suffering some an undue burden because of student loans and you live in Nebraska, contact me to discuss your situation and see if those loans can be discharged in bankruptcy. Contact me by phone, email, or by scheduling a consultation online.


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