Three U.S. Senators proposed legislation on January 23 to reverse a 2005 change in bankruptcy laws that makes it nearly impossible for private student loan debt to be discharged in bankruptcy. The Fairness for Struggling Students Act of 2013 is co-sponsored by Sens. Jack Reed (D-Ill.), Dick Durbin (D-Ill.) and Sheldon Whitehouse (D-R.I.), and, if approved, the proposed bill would restore private student loans as a debt eligible for discharge in bankruptcy. If you are struggling with overwhelming debt and considering filing for bankruptcy in Oklahoma, contact our knowledgeable attorneys at Oklahoma Legal Center to discuss your legal options. You may be eligible to file Chapter 7 or Chapter 13 bankruptcy, in order to seek debt relief.
Bankruptcy Law Changed in 2005
Student loans may be the largest form of consumer debt in the United States – topping $1 trillion – but they are the only type of debt not eligible for discharge in bankruptcy. Federal student loans haven’t been eligible for discharge since 1978, but it wasn’t until changes in bankruptcy laws enacted in 2005 that this action was extended to private student loans as well. As Durbin notes, student loans issued by the government carry mostly favorable terms, with lower interest rates, more deferment and forbearance options and income-based repayment plans. Private loans, on the other hand, often carry high interest rates and have no income-based repayment options.
In support of the proposed legislation, Durbin’s office said in a release, “In 2005, the law was unjustifiably changed to give private student loans the same privileged bankruptcy treatment as government loans, even though private student loans have vastly different terms and fewer consumer protections. Today’s bill would restore the bankruptcy law, as it pertains to private student loans, to the language that was in place before 2005 so that privately issued student loans will once again be dischargeable in bankruptcy like nearly all other forms of private debt.”
Contact Our Reputable Attorneys for Legal Help
The proposed private student loan bill has considerable support. In 2012, the U.S. Department of Education, the Consumer Financial Protection Bureau, FinAir.org publisher Mark Kantrowitz, and The Institute for College Access and Success all called on Congress to make it easier for individuals struggling with private student loan debt to seek relief through bankruptcy. Even Sallie Mae says the company is open to reforming the U.S. bankruptcy law. If you are facing costly student loans, car loans, or another form of overwhelming debt in Oklahoma, our skilled lawyers at Oklahoma Legal Center can help you consider your available options and determine the best course of action for your individual financial situation.