Most debtors cannot discharge student loan debt in Chapter 7 or Chapter 13 bankruptcy. Absent this bankruptcy protection, the student loan industry sometimes functions with impunity.
Because lenders have no reason to seriously evaluate a prospective borrower’s ability to repay a loan, they lend money all too freely. When borrowers default, the lenders end up making even more money in interest and are given grossly enhanced collection powers to get it back.
Borrowers who default on student loans are relegated to a lifetime of socioeconomic woes. Defaulting on a student loan can damage credit scores, effect employment or may result in the loss of a professional license or even a driver’s license essential to getting to and from work.
Collection efforts can range from garnishing a debtor’s wages and seizing tax returns to losing a portion of Social Security payments or disability income for lingering balances later in life. Mind boggling as it may seem, some mention has been made of debtors being arrested for violations related to the non-payment of small student loans (made much bigger with interest) dating back 30 years.
With kids today graduating with an average of 35K in student loans and the lifetime default rate as high as 50%, many Americans are calling for the return of standard bankruptcy protections to student loans. Although there have been encouraging peeps from a few in the political establishment, nothing concrete seems to be in the pipeline to alleviate crushing student loan debt.
If you have questions regarding bankruptcy protection, contact the Law Offices of Charles E. Covey for help. Charles works on behalf of clients who are struggling with difficult debt challenges using his 30+ years of knowledge and experience of the U.S. Bankruptcy Code to seek solutions for your debt challenges.