Student Loan Collection and Bankruptcy

Chapter 13 bankruptcy has become an attractive solution for those facing student loan collection including garnishments. While student loans are still not dischargable, collection can be halted for up to 60 months while in a chapter 13 bankruptcy plan. Chapter 13 plans allow debtors to postpone student loan collection by pledging to pay their disposable monthly income, or what they can afford, into a chapter 13 bankruptcy plan. This buys consumers time, but is not a permanent solution since the loans will not be discharged.

At the end of the Chapter 13 plan student loan collection can resume. The goal is to have a change in circumstances that will allow the borrower to afford their student loan payments after bankruptcy. However, if this is not the case, the option to file a new bankruptcy case is available. By the end of the plan laws could also change that give student loan debtors more repayment or forgiveness options.

The Chapter 13 bankruptcy also allows protection from other creditors while in the plan. It consolidates all debts into one affordable monthly payment while stopping all collection. This allows debtors to get their finances back on track while relieving the stress caused by harassing debt collectors. Although the Chapter 13 will not discharge the student loan debt it will give borrowers the breathing room they need to financially provide for their families.

If you have questions regarding bankruptcy in Indiana please contact Jackson & Oglesby Law at (877) 489-0908 or visit us at www.IndyBankruptcyLaw.com.  We are experienced bankruptcy attorneys and can help guide you through the entire bankruptcy process. Call us today to schedule your free consultation.

Bankruptcy Relief in Sight for Private Student Loan Debtors?

Since the decline in the economy, a staggering number of Americans have returned to school to better their employment prospects.   Regrettably, many of these students enroll in private for-profit schools and end up with a mountain of debt they can never hope to repay.  Exceedingly too many students have little to show in the way of credentials or skills for all their hard work.  Students are often forced into private student loans to fund their education.  Sky-high interest rates on private loans and fewer relief options for consumers like hardship deferments have left borrowers with little choice but to default.  Currently there is no relief for these debtors.   These loans and bad credit history can follow students for life.  Even bankruptcy doesn’t offer a fresh start.   

A bill was recently introduced that would allow private student loans to be discharged through bankruptcy.  The Private Student Loan Bankruptcy Fairness Act of 2011 was introduced to Congress May 26, 2011, by Representative Steve Cohen, Democrat of Tennessee and Senator Dick Durbin, Democrat of Illinois.  The act seeks to amend the federal bankruptcy code to remove qualified educational loans as an exception to discharge from bankruptcy.  Most private student loans were dischargeable through bankruptcy before Congress changed the law in 2005.  The Bankruptcy Abuse Prevention and Consumer Protection Act was signed into law by then President George W. Bush, this current law treats private students loans the same as federal or non-profit loans which are non-dischargeable through bankruptcy.

The current law provides no relief for debtors faced with overwhelming private student loan debt.  While, the country has a compelling interest in making it extremely difficult to evade payments for federal or non-profit debt, there is no reason to extend that protection to private student loan lenders.  High-cost private loan lenders, who often turn an enormous profit, have been given an unfair advantage over other unsecured lenders such as credit card issuers whose debts are still subject to discharge in bankruptcy.  The law change in 2005, no doubt, brought about careless lending by underwriters who no longer felt obligated to determine the borrower’s ability to pay.  Student loan debtors are now struggling to repay these pricey private loans with no chance for relief.

If the Private Student Loan Bankruptcy Fairness Act of 2011 is enacted into law, it would eliminate the undeserved protections for private student loan lenders and give struggling borrowers the possibility of a fresh start.  To show your support for H.R. 2028: Private Student Loan Bankruptcy Fairness Act of 2011 go to:  https://www.popvox.com/bills/us/112/hr2028     

If you have questions regarding bankruptcy in Indiana please contact Jackson & Oglesby Law at (877) 489-0908 or visit us at www.IndyBankruptcyLaw.com. Jackson & Oglesby Law can assist you with all aspects of your bankruptcy case. If you have questions regarding Chapter 7 bankruptcy, Chapter 13 bankruptcy, stopping foreclosure or wage garnishment, avoiding liens, stopping law suits, discharging debt, etc. we can help! Please call us today for your free phone consultation to determine which bankruptcy may be right for you.