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Proposed legislation could help people with student loan debt

If a significant portion of the debt that has you considering bankruptcy is student loan debt, you’re not alone. Almost a third of people who file for bankruptcy have student loan pending repayments. On average, it comprises almost half of their total debt. Those figures are from a study by LendEDU. That site provides tools and information to help people compare and learn about financial products.

At $1.52 trillion, student loan debt is the second largest category of U.S. consumer debt in dollars — exceeded only by mortgage debt. If you owe some of this $1.52 trillion, you may already know that student loan arrears is extremely difficult to discharge in bankruptcy.

Under the U.S. Bankruptcy Code, a debtor has to be able to prove “undue hardship” to get student loan debt discharged. Undue hardship means that a person is unable to maintain even a minimum standard of living because of their student loan debt payments.

This issue is one that legislators are well aware of. Some are trying to do something about it.

This spring, the Student Borrower’s Bankruptcy Relief Act of 2019 was introduced in the U.S. Senate by Illinois Sen. Dick Durbin. It is cosponsored by three senators running for president — Sen. Elizabeth Warren, Bernie Sanders and Kamala Harris. The bill would eliminate the section of the Bankruptcy Code that requires proof of undue hardship to get student loan discharged.

What the future holds for this bill in a Congress that many Americans feel has been rendered dysfunctional (or perhaps nearly nonfunctional) by hyperpartisanship is anyone’s guess.

However, if your debt has become overwhelming, it may be worthwhile to determine whether bankruptcy would ease this burden and help you get a fresh financial start — even if your student loan balance remains. An experienced bankruptcy attorney can review your situation and provide guidance.

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