Student loans affect all generations of Americans, from millennials to baby boomers. A recent study in Detroit showed that people nearing retirement age are one of the fastest growing demographics with student loan debt. In this election year, many presidential candidates are promoting ways they would address the student debt crisis. Younger people who have just earned their degrees are having troubling buying houses since their student loan debt is so burdensome.
With tax season upon us, some student loan borrowers are shocked to find out that their student loan servicers can intercept their tax refunds in order to pay delinquent student loan debt.
While Americans can file bankruptcy to get relief from most types of debts, student loans are among the types of debts that a debtor may not discharge in bankruptcy unless paying them back would be an “undue hardship” on the debtor. (This standard is extremely hard to meet and in one older case from Jacksonville, even a lawyer who said an auto accident left her disabled, failed to meet the high standard). In order to address this issue, the U.S. Bankruptcy Court for the Middle District of Florida (Jacksonville, Orlando, Tampa and Ft. Myers) recently instituted a “Student Loan Management Program” (Program).
The SLM Program is designed to “create a forum for debtors and lenders to discuss consensual repayment options for student loans,” according to an Order issued by the Bankruptcy Court. The Program is set up to facilitate communication between the lender and borrower so that they may come to a mutually beneficial agreement “under the administrative oversight” of the Bankruptcy Court.
Participation in the Program may be initiated by the debtor, the Chapter 13 Trustee or the creditor any time after the student loan debtor files a Chapter 13 petition in Bankruptcy Court. So, in order to take advantage of the program, and to ensure negotiations with the student loan lender will be subject to the Court’s oversight, the borrower must file a Chapter 13 Bankruptcy case.
The Court Order covering the Program requires that the parties act in good faith while participating in the Program. All communication is done through a Portal, in which all information and documentation is maintained.
The Program allows debtors to seek reduced monthly student loan payments through various Income-Driven Repayment plans, which are based on a percentage of the debtor’s monthly income. In addition, the Program allows debtors to separately classify student loans being paid through IDR Repayment Plans, something which was previously not allowed by many court decisions. (Many courts have ruled that separately classifying and favoring student loan creditors over general unsecured creditors (like credit card and medical bills) violated the Bankruptcy Code’s “anti-discrimination” provisions.)
Filing a Chapter 13 bankruptcy not only allows debtors to get relief from general consumer debts by reorganizing those debts, it could also give them relief from heavy student debt loads by lowering the required monthly payments on those loans by hundreds of dollars every month. Imagine having an extra $300 which you could use in the future to purchase a car or a house, all while stimulating the economy.
As presidential candidates and congresspersons talk about the student loan crisis, several Bankruptcy Courts have taken action to afford relief to student loan debtors. If you have burdensome student loan debt, contact the Law Office of David M. Goldman, PLLC today for a free initial bankruptcy consultation. A Jacksonville Bankruptcy Lawyer can help you decide if filing bankruptcy is best for your future.