Charlotte Bankruptcy attorney Bryan W. Stone answers the question: “Can I get rid of student loans by declaring bankruptcy?”
Iowa Senator Tom Harkin recently proposed new legislation that would allow private student loans to be discharged in bankruptcy. The bill, dubbed the Higher Education Affordability Act, is designed to lower the cost of college and reduce the enormous debt burden of students struggling with education expenses.
Under current rules, private student loans are next to impossible to discharge in bankruptcy, due in large part to a series of bankruptcy reform laws that were passed by Congress back in 2005. Under existing regulations, the loans can only be discharged in cases of fraud or extreme financial distress, with only a handful of people successfully winning the discharge of their student loan debt each year.
Harkin says his goal is to control the escalating costs of education in this country and help students who are burdened by huge amounts of student loan debt. Additionally, Harkin says he believes that transparency regarding the costs of education and the burden of repaying loans needs to be increased, so that prospective students understand the burden they are taking on.
Such private student loans amount to around 15 percent of existing education debt, according to experts. Major financial institutions like Wells Fargo, Sallie Mae, Citibank and Discover are big players in the private student loan world. These companies have lobbied aggressively to ensure that their loans cannot be discharged in a bankruptcy, protecting their own financial interest above all else.
The problem for many in debt is that federally backed loans have far more options to allow for easier repayment. These include things like income-based repayment plans, loan forgiveness and extended deferment periods. Private student loans have no such protections for borrowers struggling to make payments. Additionally, interest rates for private loans are also far higher than government loans, creating yet another financial burden for those already heavily in debt.
Critics of existing laws say that the protections written into the law to protect student loan issuers is unfair and amounts to discriminatory protection of one industry above others. Similar laws have never been proposed to protect those that provide auto, mortgage or personal loans, all of which can easily be bankrupted.
If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC today at (704) 370-2828 or find additional resources here. As professionals who are experienced in the bankruptcy arena, our attorneys will provide you with the best advice for your particular situation.
About the Author
Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.
Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.
In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.
“Senate Proposal Would Restore Bankruptcy Protection For Private Student Loans,” by Tyler Kingkade, published at HuffingtonPost.com.
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