Much to the dismay of college kids, student loans are on the short list of exceptions to what a debtor can “discharge” by filing for bankruptcy. Bankruptcy can have the affect of freeing debtors from almost all of their bills, except student loans.
The student loan exception, creditors argue, encourages banks to lend to students in need and ultimately leads to more opportunity for people to get educated. Expectedly, the greater likelihood that debtors will use bankruptcy to “discharge” their loans, the less likely creditors are to lend money.
Now, lenders are questioning the reliability of the student loan exception.
Although student loan debts cannot typically be “discharged,” the bankruptcy code allows the judge under certain circumstances to “restructure” a student loan debt to make it repayable.
The whole flurry of this debate centers on what circumstances allow the “restructuring” of student loans. Undoubtedly, advocates of creditors and advocates of debtors will spend thousands of dollars and hours in an effort to influence the Supreme Court’s determination of exactly what circumstances allow a judge to “restructure” a student loan debt.
The banking industry argues that a student loan debt may be “restructured” only after the court has held that forcing the debtor to pay the full amount would result in “undue hardship.”
A federal appeals court scolded members of the banking industry for arguing that debtors can be free from student loan payments only after an adversarial hearing to determine “undue hardship.”
Proponents of consumer rights argue that “undue hardship” can be determined without an adversarial hearing and that mandating such a hearing is ridiculous.
The Supreme Court has agreed take the case.If you are in financial trouble, call the Crosby Law Firm at 815-397-2006 to find out your options.
No comments:
Post a Comment