Can you imagine what the world would look like if student loan debt was dischargeable under bankruptcy laws? Currently, student loan debts are not dischargeable. A lot of people believe that allowing student loan debt to be dischargeable would be irresponsible and that debtors should be responsible for paying them back.
Almost every other kind of debt can be discharged in a Chapter 7 bankruptcy so why do we discriminate when it comes to student loan debt? Other debts that are not dischargeable include government fines, criminal restitution and civil judgments for negligent acts such as drunk driving. The fact that these debts are non-dischargeable makes sense, but why student loan debt?
Student loans are seen as good debt because while you are left with debt to pay back, in borrowing these loans they allow people to get the education they desire and allow them to have a better shot at finding employment in the future. This contrasts to some examples of bad debt such as credit card debt, which is mainly used for buying material goods with often no value in the future.
The law suggests that people with no student loans, but who max out their credit cards, are allowed to discharge that debt. But student loan debtors will always be required to take responsibility of their student loan debt no matter how good they are about paying their bills on time. They can never discharge their student loan debt.
However, there is one exception in the Bankruptcy Code known as “undue hardship”, but you basically have to prove that you have become so disabled that you will never be able to work in order to pay your student loan debt. Bankruptcy filings are pretty rare and it is not an easy legal process. Most people, even those with a large amount of debt, do not file for bankruptcy. Some may not pay their debts on time, but most people do not have their debts extinguished through a bankruptcy court.
The sole purpose of filing bankruptcy is to allow people a fresh financial start. Being in debt can be stressful if you cannot pay it back. Providing a fresh start allows those people a life that is not filled with unimaginable debt and debt collectors, with no way out. I think that if student loan debt continues to remain dischargeable, institutions who lend the money to students should have a bigger disclaimer that includes the fact that, student loan debt is not dischargeable in big bold letters, before they actually start handing out loans.
Keeping students in a never ending cycle of debt that they cannot pay back is not right. With that being said, if you or someone you know is experiencing huge amounts of debt that qualifies as dischargeable, or have questions regarding your debts, contact the Goldbach Law Group. We are here to help!