Bill would help resolve college loan debt via bankruptcy

On Behalf of | Aug 11, 2021 | Bankruptcy |

If a Missouri college student has no way to pay back a federal loan, the financial strain of the situation could continue throughout his or her lifetime. Many people in this state and others are 10 years or more out from their college days but still have been unable to satisfy their loan debt. Two senators, one a Democrat, the other, a Republican, have joined forced to launch a bill that would enable such people to qualify for bankruptcy to discharge federal college loan debt.

There are several stipulations to the bankruptcy bill

In order for a person facing financial trouble due to an inability to pay back a federal college loan to qualify for bankruptcy under the recently launched bipartisan bill, he or she would have to be carrying the debt for more than 10 years in order to waive the usual requirement of having to prove undue hardship to discharge student loan debt through bankruptcy. Under the same bill, people who are struggling to pay back private loans would still have to fulfill the undue hardship requirement to be eligible for the bankruptcy program. The senators believe that the bill has a good chance of being enacted into law because of its support on both sides of the political aisle.

Some colleges would have to pay back the government

Another stipulation in the student loan bankruptcy bill states that when a college has 33% of its students receiving federal loans, any loan debt discharged through bankruptcy would require the school to pay back a portion of the debt to the government. Those who support the bill say that people who suffer serious financial debt for years after college are often the same people who were misled into accepting loans they were never qualified to pay back. A recent court case involved a student who sought bankruptcy to discharge her debt from a private student loan; the court did not grant her request, ruling that she had failed to prove undue hardship.

Support is available for any person considering filing for bankruptcy

Any number of issues can cause a financial crisis. If a Missouri resident is worried about losing his or her home or other similar issues, he or she may request a meeting with a bankruptcy law attorney. Such an attorney can review a particular case to determine whether filing for bankruptcy is a viable option.