Student loan repayment obligations are a problem for many people in North Carolina and around the country, and now it appears there may be some relief in sight. While this is still a hot topic, there is a proposal on the table that would establish a Chapter 10 bankruptcy category. The discharge of college loan debt has generally not been allowed unless certain criteria are met, but the new chapter could be a real encouragement for many.
Chapter 7 bankruptcy similarities
The legislation proposed by Sen. Elizabeth Warren would allow a Chapter 10 petition that can be used similar to a Chapter 7 bankruptcy discharging at least a portion of all accumulated student loan debt for the petitioner. It could be specific to student debt only.
Qualifying for the bankruptcy chapter
One of the biggest problems with Chapter 7 bankruptcy filings has been petitioners qualifying for a discharge of unsecured debt. Those who cannot qualify must go through a Chapter 13 debt restructuring payment plan. This typically takes up to five years to complete, and it is a deterrent to many unless they are facing loss of a real estate property. Many former students are in professional positions that pay well enough that they may not qualify for the debt forgiveness. This is the type of details that will need addressing when the legislation is finally approved for a vote, and especially when seeking a complete debt discharge.
No competing legislation has been offered so far in Congress, and there are assuredly opponents of any debt relief plan. However, it does appear there will be some type of shift in the landscape regarding student loan debt in the near future as the current administration has stated its support for the measure at least in part and in principle.