Although bankruptcy can be difficult for borrowers there are many student loan repayment options available, especially under court-supervised student loan management programs. This allows for tremendous relief in the increasingly complex student loan system.
The pandemic repayment moratorium provided relief as student loans are the second largest source of consumer debt in America. Many will have to repay and manage their debt once these moratoriums end.
Additionally, the recent announcement of President Biden regarding student loan forgiveness up to $20,000 is uncertain. It’s also more complicated than most people will be able navigate (especially when there are so many scams preying on the unwary). This makes it vital to consult with an experienced consumer lawyer.
Chapter 13 bankruptcy was created to ease student loan borrowers’ bankruptcy. It is especially useful when overseen through court-based student loans management programs.
THE PROCESS IS IMPERATIVE ON A COURT PROGRAM
A student loan borrower is often caught in a difficult situation when they file bankruptcy. If a student loan borrower files bankruptcy, it is almost impossible to discharge the debt.
DIGTING A DEEPER HOLLE
The U.S. Education Department puts borrowers in an administrative forbearance after a bankruptcy filing is made. This allows the U.S.E.D. to protect their assets. The bankruptcy protections are not violated. The bankruptcy protections do not require separate payments. However, interest continues to accrue and the borrower may end up owing more than they originally owed. It is hard to imagine a fresh start bankruptcy can provide.
To make matters worse, federal student loan borrowers are not allowed to enroll in the Income Driven Repayment Plans. These IDRs allow for a monthly payment that is based on discretionary income, and as low as $0.
These repayments can also earn debtor credit towards the forgiveness of their loans. A variety of programs allow borrowers to have their entire student loan balance forgiven. Many times, it takes as little as 10 year. Borrowers have many options to avoid default.
THE BENEFITS OF COURT PROGRAMS
These options are limited if the debtor is in bankruptcy. The Law Offices of John T. Orcutt, which recognized the difficulty and the myriad of issues student loan debtors face in bankruptcy, convinced U.S.E.D. several years ago. They did this through litigation in North Carolina as well as policy advocacy in Washington, D.C. This illegal policy was changed and borrowers in bankruptcy were allowed to participate in the IDR and forgiveness programs for the first time.
A number of bankruptcy courts took further steps to adopt student loans management programs. These SLM programs offer structure and transparency to all parties, including borrowers, attorneys, courts and the U.S.E.D. SLM programs allow borrowers, attorneys, courts, and the U.S.E.D. to engage in a more efficient and effective consensual resolution of student loan debt. Borrowers have no additional rights or options. Borrowers can simply review and enroll in IDR plans that they would be able to do without bankruptcy.
Borrowers can repay their loans in an IDR, particularly if they are enrolled in a student loan management program. They then work towards forgiveness of the entire amount. This allows borrowers to reduce their monthly student loan costs and often allows them to file for bankruptcy.
Although bankruptcy can be difficult, borrowers can access the federal student loan repayment options by working with IDRs and court-based loan management programs.
These SLM programs can help to reduce the student loan crisis and expired moratoriums. This will result in better outcomes and greater cost savings for everyone involved.
Attorney At Law Magazine published the post A New Approach for Tackling Student Loans In Bankruptcy.