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Congress Debates Whether to Allow Student Loan Debts in Bankruptcy

Few students can afford to pay for college completely on their own. The majority of students take out at least some form of financial aid to pay for their college education.

Sad10_07012014According to the 2007-08 National Post-Secondary Student Aid Study (the last year for which data is available), 66 percent of undergraduate students finished their degree with some debt, and the average debt was $27,803.

Student loan debt for graduate and professional students such as those attending law school or medical school can exceed $100,000.

Students graduating with poor job prospects in a still floundering economy may find themselves unable to pay back these debts. While many government loans offer income-based repayment plans and other options for those experiencing financial hardship, many private loans do not.

The high cost of student debt and the limited options for those with private loans has spurred some legislators to advocate for allowing private student loan debt to be included in a bankruptcy filing.

Proposed Changes

Changes to the bankruptcy laws in 2005 broadened the definition of the type of student loans that were excepted from a discharge in bankruptcy.  In essence, the changes made private student loans ineligible for discharge in a bankruptcy - except in extreme cases of hardship, for which a petition to the Bankruptcy Court could be made. Federal student loans have been ineligible for discharge unless a showing of "undue hardship" could be made by the bankruptcy debtor for two decades.

Sen. Rick Durbin (D-IL) has proposed allowing private loans to be included in a bankruptcy. A bill was proposed in 2011 to make these changes, and legislators are currently debating it.

Some feel that allowing the change would prompt abuse from student borrowers, but others note that rising tuition costs, high interest rates, and fewer economic opportunities have led to a crisis in student-loan lending and that students need relief where appropriate.

In the fourth quarter of 2011, outstanding student loan debt reached $867 billion, according to the Federal Reserve Bank. Student loans exceed what Americans owe on credit cards and auto loans combined. The Consumer Financial Protection Bureau estimated that total federal and private student loan debt is more than a trillion dollars.

Bankruptcy For Debt Relief

If you are struggling with student-loan debts, you don't have to wait until Congress makes a decision to act. Bankruptcy may be able to provide you some debt relief by eliminating other unsecured debts or providing a debt-repayment plan for your other debts, allowing you to free up the income needed to pay back your student loans. A North Carolina bankruptcy lawyer at the Law Offices of James Scott Farrin may be able to help! Call 1-866-900-7078 to get a free evaluation of your case to find out what type of bankruptcy may be appropriate for you.

Home Foreclosures Surge in January

Foreclosure sales spiked in January, indicating that many across the country are still struggling in the slow economy and may benefit from debt relief.

Houses_06062014The LPS Mortgage Monitor reported that foreclosure sales rose to 91,000 in January, up 29 percent from the previous month. The number of foreclosure starts also increased by 28 percent, and starts for repeat foreclosures hit an all-time high of 47 percent.

The agency suggested that the increase could suggest that a backlog of proceedings have finally started to move forward.

Foreclosure sales had dropped off in the fall 2010 after problems with banks' documentation practices surfaced. Sales had remained flat through 2011.

The biggest increase in foreclosure sales occurred in the 24 "judicial states" - states where banks must get a judge's permission before foreclosing on a home. Foreclosure sales in these states were up 51 percent over the previous month.

North Carolina is a non-judicial state.

Bankruptcy for Debt Relief

Now that banks are initiating foreclosure proceedings more quickly, many families may be forced to make some hard decisions. Perhaps you have been struggling with your mortgage for months and have fallen behind significantly.

If you are facing the threat of foreclosure - or if the bank has already initiated foreclosure proceedings against you - bankruptcy may be able to offer you the debt relief you need. Depending on how far behind you are on your mortgage, and how much other debt you have accumulated, bankruptcy may allow you to catch up on your payments through a structured debt-repayment plan, or it may allow you to eliminate unsecured debts, freeing up the income to pay back your mortgage.

Now is the time to act. Call the Law Offices of James Scott Farrin at 1-866-900-7078 for a free case evaluation to find out how bankruptcy may be able to help you. Don't wait until it's too late!

Research Suggests that Changes in Bankruptcy Laws May be Limiting Some People Who Want to File for Bankruptcy from Doing So

Sad11_07082014Tax time may give some the chance they need to finally to take a little trip. Others may use that extra cash to pad their savings for a rainy day.

For many who are struggling financially, tax time gives them the opportunity to finally declare bankruptcy, new research shows.

Economists at Columbia University, the University of Chicago, and Washington University in St. Louis found that the number of bankruptcy filings increases after people receive their tax refunds - when they finally have the money to pay the increased filing costs brought about by changes to the bankruptcy laws in 2005.

The researchers argue that many who want to file for bankruptcy cannot afford the average of $1,477 in fees that it now costs to file - an increase of approximately 60 percent since the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act was passed. The law also requires people to pay for their own mandatory credit counseling before they can file.

Limited Access

According to the American Bankruptcy Institute, more than 2 million people filed for bankruptcy in 2005. After the new law was passed, that number dropped 71 percent to 598,000.

Researchers for this new study said that bankruptcy filings rose 2 percent after tax rebates were received in 2001, but they increased 7 percent after tax rebates in 2008 - an increase of more than 300 percent.

The evidence suggests that the changes in the law have prevented many with lower incomes from filing for bankruptcy, rather than screening out abuse as intended, the researchers said.

"According to our research, bankruptcy fees prevent the most financially distressed households from being able to file, and tens of thousands of households will have trouble saving up for bankruptcy in 2012," said Jialan Wang, a finance professor at Washington University in St. Louis and one of the study's authors.

Bankruptcy provides a valuable form of debt relief for many families, and an experienced bankruptcy lawyer can help you determine how best to file bankruptcy if it is the right solution for you. Call the Law Offices of James Scott Farrin at 1-866-900-7078 to find out how we may be able to help you!

Contact Information

Asheville Law Office

300 Ridgefield Court Suite 309
Asheville, NC 28806
Phone: 828-552-8215
Toll Free: 1-866-900-7078

Charlotte Law Office

301 S McDowell St, Suite 900
Charlotte, NC 28204
Phone: 704-599-1078
Toll Free: 1-866-900-7078

Durham Law Office

280 South Mangum Street, Suite 400
Durham, NC 27701
Phone: 919-688-4991
Fax: 800-716-7881

Fayetteville Law Office

2915 Raeford Road, Suite 204
Fayetteville, NC 28303
Phone: 910-488-0611
Toll Free: 1-866-900-7078

Goldsboro Law Office

1308 Wayne Memorial Drive, Suite B
Goldsboro, NC 27534
Phone: 919-731-2581
Toll Free: 1-866-900-7078

Greensboro Law Office

300 N. Greene Street, Suite 850
Greensboro, North Carolina 27401
Phone: 336-665-7072
Toll Free: 1-866-900-7078

Greenville Law Office

702 Cromwell Dr. Suite G
Greenville, NC 27858
Phone: 252-355-5205
Toll Free: 1-866-780-3227

Henderson Law Office

514 Dabney Drive, Suite 200
Henderson, NC 27536
Phone: 252-492-4600
Toll Free: 1-866-900-7078

Morganton Law Office

216 N. Sterling Street, Suite B
Morganton, NC 28655
Phone: 828-219-3080
Toll Free: 1-844-520-2894

New Bern Law Office

1505 South Glenburnie Rd, Unit P
New Bern, NC 28562
Phone: 252-634-9010
Toll Free: 1-866-780-3422

Raleigh Law Office

4325 Lake Boone Trail, Suite 100
Raleigh, NC 27607
Phone: 919-834-1184
Toll Free: 1-866-900-7078

Roanoke Rapids Law Office

709 Julian R. Allsbrook Highway
Roanoke Rapids, NC 27870
Phone: 252-537-9670
Toll Free: 1-866-900-7078

Rocky Mount Law Office

144 Woodridge Court
Rocky Mount, NC 27804
Phone: 252-937-4730
Toll Free: 1-866-900-7078

Sanford Law Office

703-B South Horner Boulevard
Sanford, NC 27330
Phone: 919-775-1564
Toll Free: 1-866-900-7078

Wilson Law Office

2315 Airport Blvd Suite A
Wilson, North Carolina 27896
Phone: 252-246-9090
Toll Free: 1-866-900-7078

Winston-Salem Law Office

301 N. Main Street, Suite 2409-C
Winston-Salem, NC 27101
Toll Free: 1-866-900-7078