Bankruptcy reform urged after students learn hard lessons
On behalf of The Rollins Law Firm posted in Bankruptcy Exemptions on Thursday, August 16, 2012.
People all across Mississippi have a goal to graduate from college. Between the difficult job market and financial struggles that many families routinely face, however, some believe that college is not an option for them. On the other hand, college graduates can earn more money than many people who do not go to college. When people find themselves stuck between these two realities, many opt to take out private student loans to attend college.
However, students may not realize that private student loans are considered to be a bankruptcy exemption after a broad bankruptcy reform package went into effect in 2005. As it is now, those who are in debt and have student loans cannot have those financial obligations waived if they file for bankruptcy protection. Many groups are asking Congress to consider bankruptcy reform.
One woman is proving to be a good illustration of how damaging the current law is for the 2.9 million Americans who have debt from private student loans. The 46-year-old woman decided a few years ago that she wanted to go back to college to help advance her career. She took out a private student loan and started classes. However, she was forced to drop out when she got sick. At the same time, her husband needed a liver transplant. They ended up $33,000 in debt and considered filing for bankruptcy.
However, even if the couple were to file for protection, the debt from those student loans would not be discharged. Even federal student loans, which accounts for about 85 percent of all student loans, are not eligible.
The confusion that surrounds bankruptcy law combined with an economic recession and poor job outlook is putting many students in an unexpected and unmanageable amount of debt. Hopefully, there will be a reform to the bankruptcy law which can allow some relief for students. Until then, it can be very helpful for students to speak with an attorney who thoroughly understands bankruptcy law. There may be options for relieving other sources of debt.
Source: The Huffington Post, "Private Student Loan Bankruptcy Rule Traps Graduates With Debt Amid Calls For Reform," Tyler Kingkade, Aug. 15, 2012
Our firm handles other types of bankruptcy exemptions as well. If you would like to learn more about our practice, please visit our Mississippi bankruptcy exemptions page.