Chicago Bankruptcy Can Help Students With Debt Caused By High College Loans
The Lexington Herald-Leader recently reported about a couple in Kentucky facing $70,000 in federally insured student loans, despite dropping out of school because of family problems and defaulting on the loans.
The couple is now buried and debt, yet haven't filed for bankruptcy. While it's true most student loans cannot be discharged, filing bankruptcy can still help those struggling with such debts. And more help may be on the way to deal with predatory lenders in the student-loan sector.
Lawmakers recently introduced legislation that would allow students to discharge commercial student loans in bankruptcy proceedings, reversing a 2005 law, according to U.S. News & World Report.
Even without the law change, filing for bankruptcy in Chicago is a way to eliminate debt that is causing stress, hardship and frustration. But the first step is consulting with an experienced Chicago Bankruptcy Lawyer who can help explore all options and determine the best avenue for you based on the laws in place.
According to the news report, the national average for a three-year default rate for 2008 is 13.8 percent, according to federal data. Private, for-profit "career colleges" tend to have the highest default rates because of how expensive tuition is compared to the average salary upon graduating.
While it's possible that some student loans can be considered an "undue hardship" and can be discharged, it requires showing a bankruptcy court judge this is the case. If you are able to work, this can be difficult.
But according to U.S. News & World Report, the law may be changing. With college costs rising and the economic climate getting worse, a change to the bankruptcy law would be helpful for many people.
Both bills introduced in the U.S. Senate and U.S. House of Representatives would restore the ability to discharge commercial student loans in bankruptcy proceedings, reversing a 2005 change to the law for borrowers who find themselves unable to make payments on their loans.
"Before changes were made to the bankruptcy code in 2005, only government issued or guaranteed student loans were protected during bankruptcy," said Sen. Dick Durbin, D-Ill., in a press release. "This protection has been in place since 1978 and was intended to safeguard federal investments in higher education. Today's bill would restore the bankruptcy law, as it pertains to private student loans, to the language that was in place before 2005, so that privately issued student loans will once again be dischargeable in bankruptcy."
The law change is particularly crucial in today's economy, where only 56 percent of 2010 graduates were able to find work, according to a study by the John J. Heldrich Center for Workforce Development at Rutgers University.
But even without the law change, if it happens, bankruptcy can be helpful for those struggling with debt that is brought on by student loans. While discharging the student loans can be difficult, filing for bankruptcy can offer the opportunity to eliminate other debt, making it easier to pay back what is owed. Being mired in debt is difficult on anyone and using the laws to protect consumers can provide a fresh start for Chicago families.
If you need to speak to a Chicago bankruptcy attorney call the DebtStoppers Bankruptcy Law Firm at 800-440-7235 today for a free debt analysis. Call 800-440-7235.
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Concern grows about default rates on student loans in Kentucky, by John Cheves, The Lexington Herald-Leader