Student Loans- Find out how the Bankruptcy Laws may change with the Fairness for Struggling Students Act of 2013

"Fairness for Struggling Students Act of 2013".... Catchy name, huh? This bill was proposed in January and if it passes, it can help bankruptcy filers who are saddled with student loans. As the laws stand today, it is virtually impossible to eliminate any type of student loan in bankruptcy.  When bankruptcy laws are written, the government naturally wishes to protect itself (I mean, ahem, tax payer money) and therefore, government debt cannot be wiped out in a bankruptcy. This includes student loans issued by the federal government.  Students filing for bankruptcy have been prohibited since the late 1970's from the ability to discharge federal loans. In 2005, the exception from bankruptcy discharge was extended to private student loans which usually have less favorable terms and a higher interest rate.  The new act seeks to restore the bankruptcy laws to pre-2005 as it applies to student loans. Let's say that you had private financing from the local bank in college- nothing to do with the federal government, and your roommate had a federal student loan. You are both filing for bankruptcy after the new law passes (if it passes). Your roommate will still need to repay the loan but you would not have to.  

There are no guarantees that the bill will pass, as similar bills were introduced in the past and went no-where. Even if it does succeed this time, it could be a while before it takes effect.

If you are struggling with student loans in addition to non- student loan debts (credit cards, medical bills, etc), you may wish to look into bankruptcy as an option. Even if you still have to pay back your student loans in a bankruptcy, this might be much easier to do if you can eliminate credit card bills.  Attorney Carol O'Connor Cadiz helps people in bankruptcy in the Chicago land area.  Call 630 250-8813 or you can fill out a webform at www.cadizlaw.com to request a consultation.