On May 9th, 2019, New York Representative Jerrold Nadler introduced the Student Borrower Bankruptcy Relief Act of 2019, also referenced as H.R. 2648, to the House of Representatives.
It is commonly accepted that student loan debt is nondischargeable in a bankruptcy filing. This means that student loan debt survives a bankruptcy discharge and is still owed by the filer, unlike debt such as credit cards or personal loans. In very rare and specific instances, a small number of bankruptcy filers have received a discharge of their student loans, but at this time it is incredibly unlikely for debtors to be granted such relief.
Representative Nadler is aiming to change that. The Student Borrower Bankruptcy Relief Act aims to provide, on a much wider and more accessible scale, bankruptcy relief for student borrowers. The bill proposes that amendments be made to the current Bankruptcy Code, Title 11 of the U.S. Code. He proposes two changes:
1. Section 523: Exception to Discharge
- Ratification of the Bill would strike Paragraph 8 of Subsection (a) that states:
- “unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—
- A. (i.)an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or (ii)an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
- B. any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual.”
2. Section 1328(a)(2): Conforming Amendment
- Ratification of the Bill would strike the above section to its additional reference in this section.
Should these changes be approved, student loans could be wiped away without having to prove undue hardship or extreme circumstances. This would be a vast and incredible change for those with oppressive student debt and an inability to pay, especially in times of great economic hardship due to COVID-19 and its effects.
While the Bill has not yet passed, Lodestone Legal Group is staying up to date with the ongoing legislation and our team is available to discuss bankruptcy options with hope to provide even greater help in the future.
Post Authored by Rachel Lamey