Possible relief for student loans in the near future

On Behalf of | Dec 24, 2020 | Bankruptcy |

Student loan debt is a large burden for many South Florida residents. Even after earning a prestigious degree, some student loan borrowers struggle to keep up with their repayment obligations. Recently, a bill was introduced that may provide some relief for student loan borrowers.

Expanding bankruptcy laws

Current bankruptcy laws do not provide relief for most student loan debts. That means that a person who files for bankruptcy could have their medical, credit card, private loan and other debts forgiven but still be obligated to make student loan payments. A new bill introduced by Senator Elizabeth Warren and Representative Jerrold Nadler aims to change that.

The Consumer Bankruptcy Reform Act of 2020

Under the proposed bill, student loan debt would be treated like other debts under Chapter 10 bankruptcy. According to Warren, expanding Chapter 10 bankruptcy to include student loans would provide meaningful bankruptcy relief. As the law stands now, many people are still crushed by student loan debt even after filing for bankruptcy.

Other options besides bankruptcy

It’s possible that there could be some other student loan relief options that do not require a debtor to file for bankruptcy. Student loan debt collectors are currently under orders by the Department of Education not to pursue any collections activities. Interest accrual has also been suspended on student loan debt, and there is talk of possible relief for student loans in a new stimulus package.

Is bankruptcy a good option for student loan debt?

If student loan debt becomes forgivable in bankruptcy, a debtor will still have to make a decision about whether bankruptcy is a smart option for them. While bankruptcy may provide the most relief from debt, its affect on creditworthiness should be considered also. An experienced attorney may help a debtor understand their options.