Will Bankruptcy Laws Change To Facilitate Student Loan Debts?
Unfortunately, I would not count on it.
The National Association of Consumer Bankruptcy Attorneys (NACBA) has been lobbying Congress very vigorously for several years to try and get the law to change a little bit. They have not been successful as of yet. Maybe they can get the law so that student loans can be discharged if they’ve paid on it for 10-12 years. I don’t think we want to treat student loans like credit cards since the government guarantees these loans, but some backdoor needs to be created. We need to provide some protection for people who haven’t been able to make it, because up to this point in time, they’ve been sucked into the student loan issue.
Perhaps the student loan companies may be willing to negotiate something because, ultimately, after some period of time, they can be discharged in the bankruptcy. Right now, a student loan company is very reluctant to negotiate anything in terms of cash settlements or payments longer than 10 years because they know that a student loan is non-dischargeable! They have no incentive for them to negotiate or be flexible. If there was some possibility of discharging it in bankruptcy after some years, it might make the student loan companies more flexible in terms of negotiation and finding creative solutions. I’m hoping this lobbying in Congress will at some point yield some results, but it hasn’t happened yet.
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