Support for Bankruptcy Eligible Student Debt

May 6, 2012 by  Filed under: Bankruptcy 

The problem of student loan debt continues to be at the forefront of the bankruptcy debate. On the heels of an outpouring of support for a recent push for loan forgiveness, the movement to harness and begin eliminating the debt has been expanded to include the idea that those in dire financial straits ought to be able to include student loans in bankruptcies. Under current federal law, these debts may not be included as part of a bankruptcy filing. The argument for allowing student loan debts to be discharged in bankruptcy court is centered on the idea that a poor job rate plus high loan debt for new college grads are ultimately only making federal debt worse.

Bigger Problems

Because current salary trends indicate that entry level wages do not provide sufficient income for recent graduates to be able to pay their loan payments either in part or in full, many are being forced to file for forbearance or deferments. While in deferment, student loan interest continues to accumulate, adding to the principle amount and only increasing student loan debt. Eventually debtors find themselves with financial debt they cannot pay and few options for alleviating financial pressure.

The primary argument in support of allowing student loan debt to be included in bankruptcies is that it would ultimately bring about the much needed accountability for the federal government as well as private lending sector, both of which are currently viewed as contributing to a system that has few checks and balances for insuring that colleges are preparing students for success after education. Fear of losing money through bankruptcy would make securing private loans more difficult which would force students to have to fund more of their education out of pocket. In turn, universities would be forced to keep tuition in check in order to continue to be able to attract students. Additionally, the government, faced with a financial loss, will put more pressure on schools to insure that students are being prepared to secure jobs that will make them financially independent enough to be able to repay student loan debt.

Although only time will tell whether or not the congress ultimately embraces student aid reform, student loan debt continues to rise. It’s currently $1 trillion dollars and rising tuition costs continue to make it unrealistic for the vast majority of students to finance their educations exclusively with their own resources. Increasingly, an “out” seems the only way to break the troubling debt cycle created by ballooning unpaid student debt.

The Walters Dunn law firm aims to help local residents resolve their debt issues and achieve a financially healthy future. They provide high quality legal representation that helps lower monthly debt payments, stop wage garnishment,prevent foreclosures and repossessions, and stop calls from creditors. The Walters Dunn bankruptcy lawyers in Austin have many years of experience in all aspects of Chapter 7 and Chapter 13.

Article Source:
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