New bill aims to ease student loan bankruptcy rules

It is a difficult process to get student loan debts discharged in a Maryland bankruptcy. However, the process may be easier if the Student Borrower Bankruptcy Relief Act of 2019 were to become law. By 2022, student loan debt in the United States is expected to be more than $2 trillion. There are doubts as to whether the entire balance would ever be repaid as roughly 25 percent of borrowers have missed payments or are in default.

Student loans are only discharged if a borrower can show an undue hardship would occur if he or she is forced to make future payments. However, there is no definition as to what constitutes an undue hardship, which means that bankruptcy judges around the country could create vastly different rulings. In the past, student loans could be discharged after seven years. This rule was put into place to prevent a person from having debt discharged immediately after graduating.

However, prior to 1976, only 1% of student loan debt was actually cancelled through bankruptcy. Some are worried that if the bill passes, it would result in higher interest rates on student loans. It may also result in the cost of college being shifted from the borrower to the taxpayer.

Individuals who are looking for a way to better manage their debt may wish to file for Chapter 7. Doing so may allow for most unsecured debts to be discharged in a matter of weeks or months. A bankruptcy attorney may help an individual learn more as to what debts can be wiped away. Most individuals who file for bankruptcy get an automatic stay of creditor contact.

Source: CNBC, “It could become easier for people with student debt to file for bankruptcy“, Annie Nova, May 11, 2019