Is bankruptcy student loan release now within reach? | Business
Anna Helhoski, NerdWallet
Student loan borrowers looking to have their debt canceled by bankruptcy – the so-called discharge – generally find it to be an expensive process with standards that can be difficult to meet. But recent bankruptcy court rulings and the support of lawmakers for relief from overburdened borrowers may indicate that a change is coming.
In January, a New York court discharged over $ 200,000 in student loan debt for a borrower. Then, in August, a federal appeals court ruling eliminated $ 200,000 for a Colorado couple who held 11 private student loan accounts. And in September, a New York judge ruled to apply a $ 400,000 pre-bankruptcy discharge of federal student loans from a borrower that a service agent had failed to execute.
The rulings could set a precedent for future bankruptcy cases involving student loans, said John Rao, an attorney at the National Consumer Law Center.
“A lot of people, even some of the attorneys who represent consumers, have thought for years that you shouldn’t even try because there’s no way you will win, but I think everyone is watching now. kind of new look, “says Rao.
Courts are not the only example of potential relaxation of standards. The House of Representatives recently passed a bill that would extend bankruptcy relief to more student loan borrowers. And former Vice President Joe Biden’s platform, the Democratic presidential candidate, included a bankruptcy reform proposal to end rules that make it “nearly impossible” to pay off private student loan debt. .