Proposed Legislation Could Make Student Loans Dischargeable in Bankruptcy

It is no secret that student loan debt has supplanted other forms of debt as a leading concern for millions of America. Today, student loan debt exceeds all other forms of consumer debt, including credit card debt. Unlike credit card debt, however, student loans are not dischargeable in bankruptcy cases (except in rare circumstances), meaning that consumers will nearly always still be on the hook for student loan debt even after they complete the bankruptcy process and receive a debt discharge.

As the student loan debt crisis has unfolded over recent years, its impact has been felt by countless individuals and families, many of whom are younger Americans looking to make a life of their own. Unfortunately, they often find that student loan debt becomes a significant barrier to financial stability, as well as the financial milestones that traditionally typified American life, such as car and home purchases.

In an effort to address the growing crisis, advocates and lawmakers have worked aggressively to identify solutions. Among these are efforts to pass laws that make it easier for consumers in debt to discharge student loans during bankruptcy. This is the primary goal of a bill introduced in Congress earlier months: HR 2366: the Discharge Student Loans in Bankruptcy Act of 2017. As its straightforward name implies, HR 2366 would amend Title 11 of the U.S. bankruptcy code to make student loans dischargeable.

HR 2366 may still be in the early stages of wading through the legislature, but it is important to raise awareness about the bill. Although student loan debt is a complex problem that requires many different solutions to fully address, ensuring that real people in need have full access to the benefits of bankruptcy is an essential focus. Most importantly, Americans should understand that bankruptcy is intended to help consumers with insurmountable debt, which can be incurred in part when young people have hopes of gaining an education and good job.

As we have seen, however, student loans don’t always provide the catalyst for strong financial health, and in the worst cases, can become life-altering financial and emotional burdens. In fact, the problem has kept the American dream a dream for a substantial part of an emerging generation, and has also served to impede economic growth for the entire country. As proponents of the bill state, it simply doesn’t make sense for debtors with student loan debt to be in a worse position than those who have mortgage or credit card debt. They too deserve the opportunity to receive help when they feel there is little hope in sight.

As Worcester bankruptcy attorneys who represent men and women throughout Massachusetts, we have seen the student loan debt crisis up close and personal, and know that it can be a profound challenge for people who want simply to succeed in life. By eliminating the barriers in our bankruptcy code to allow those with heavy debt burdens to find relief, we believe there will be fairness in the system, and renewed hope for people who deserve it.