I have written here before on how student loans are non-dischargeable in bankruptcy, absent financial hardship, as well as ways one could possibly prove said hardship.  Over the years, these loans have been tougher and tougher to get rid of, the latest stroke being the 2005 changes to the bankruptcy laws that included non-guaranteed student loans in the "nondischargeable" category.  However, today I can report that there is some hope for those owing student loans not guaranteed/backed by the government.

Yesterday, the House Judiciary Subcommittee on Commercial and Administrative Law approved on a 6-3 party line vote the Private Student Loan Bankruptcy Fairness Act (H.R. 5043). Hopefully, if passed, this bill will restore fairness in student lending by treating privately issued student loans in bankruptcy the same as other types of private debt. Under the bill, privately issued student loans will once again be dischargeable in bankruptcy.

From here the bill goes before the full Judiciary Committee. Hopefully, action will be taken by this Committee before the end of the year. A similar bill has been introduced in the Senate (S. 3219) by Senators Durbin (D, IL), Whitehouse (D, RI) and Franken (D, MN).  The sea change that was the enactment of BAPCPA (Bankruptcy Abuse Protection and Consumer Protection Act) in 2005 happened before we entered this "Great Recession" when times were good and legislators were able to convince themselves that a significant number of people were abusing the bankruptcy laws in unfairness to creditors.  Hopefully,  this bill is a sign that Congress may now realize that people are really hurting, and that the harsher provisions of BAPCPA need to be repealed in order to give people the relief, and fresh start, that they need.  Let's hope that happens!

Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.
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Christopher Winn 09/23/2010 08:38 PM
The biggest concern about H.R. 5043 is even if it passes, most attorneys don't believe that student loans can be discharged so finding someone help with the BK is actually the most challenging part. I've done ample research into my loans, and they are definitely private loans; this theoretically should prevent having to do an adversarial proceeding, but I still see challenges until there is a precedent set.
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Steven J. Richardson 09/24/2010 09:29 AM
Hopefully the codification of this "rollback" to prior bankruptcy law will be enough to convince attorneys that it can be done. Some may seek a "comfort order" from the judge declaring it dischargeable, but I think you won't have the problem you anticipate. If you are in New Jersey and I can help you with this, please let me know.
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