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Students May Get to Discharge Student Loan Debt in Bankruptcy

If the Fairness for Struggling Students Act becomes law, private student loans could be included in a personal bankruptcy.

As student loan debt reaches record highs, many students are getting buried by their loan payments before making it into the job market. Tuition and the exploding growth of private for-profit schools has led to many students graduating with a $25,000 or greater debt to carry.

Most government-backed loans are exempt from being discharged in a bankruptcy. This is true with government-guaranteed student loans, and the Struggling Students Act will not change the current laws related to federal student aid. However, the proposed legislation would allow individuals to discharge student loan debt from non-government and for-profit lenders.

The ability to discharge student loan debt is nothing new. In fact, the inability to discharge for-profit education debt is only seven years old. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act was passed and signed into law. Upon closer examination, the law did more to protect banks and lenders than consumers.

It was with the Bankruptcy Abuse Prevention and Consumer Protection Act that borrowers lost the right to include their for-profit student loan debt in a chapter 7 bankruptcy. Three years after that legislation was passed, the employment rate and recession put a strain on many people,e which was only magnified by having to carry excessive student loan debt, even after a successful bankruptcy.

The bill does not try to simplify or expedite the bankruptcy process, but rather allow for-profit student loans to be discharged in a personal bankruptcy, as they were prior to 2005.

For the bill to become a law, it would have to be ratified between the U.S. House and Senate. The bill is still being debated in the Senate, and has not yet been put to a vote. Should the Senate pass the bill, it will go to the U.S. House of Representatives and if passed, be sent to President Obama’s desk to sign.

Neither President Barack Obama, nor Republican Presidential Candidate, Mitt Romney endorsed the bill. Until a reversal of the 2005 restriction on for-profit student loan debt is successfully enacted, individuals will be unable to discharge the burden of their student loan.

Shiobhan Olivero is the Owner and President of Olivero Law If you need a Brandon bankruptcy lawyer, Tampa bankruptcy lawyer, or Tampa bankruptcy attorney, call 813.654.5777 or visit Brandonlawoffice.com.

Posted on Tuesday, May 22nd, 2012 at 5:39 pm under News and Press.
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Couples are More Likely to Go Bankrupt than Single People

A greater percentage of bankruptcies are filed as joint cases.

Combining two incomes can often strengthen a household’s finances. Two earners can contribute more to savings and retirement planning. Unfortunately, a two-income household often becomes dependent on both partners, so when one loses a job, the household can suffer from underemployment.

Couples are more likely to purchase large luxury items, such as vacation homes, and often choose to live in larger homes in safer neighborhoods. However, even with proper planning, an unexpected event in the family can lead a couple to bankruptcy, which is why 44% of bankruptcies are joint filings.

“It’s easy for a successful couple to buy nicer homes, cars, and travel more, when both are gainfully employed. If the home’s expenses are based on the total household income, a decrease in that income could have long-term effects. Credit cards may be used to cover bills, which will lead to more expense in the future. Ultimately, the couple has to do what’s best to protect their assets and get back on the right track. Filing a joint chapter 7 bankruptcy may be the best solution,” said Tampa Bankruptcy lawyer, Reginald Osenton of the Olivero Laws.

Of course, many couples do not face bankruptcy because of lavish spending. As salaries remain flat and inflation increases, even two-income households can struggle to make ends meet.

Since 2000, median household incomes have dropped 7%, while annual inflation has increased between 2% and 3% every year except 2009. In 2009, the U.S. experienced an inflation rate of -0.34.

“As expenses go up and incomes go down, many couples will need to review their options regarding their finances. If a large portion of your household income is servicing unsecured debt, a bankruptcy may make it easier to cover your cost of living” said Tampa bankruptcy attorney, Osenton.

To learn more visit, http://www.brandonlawoffice.com.

Posted on Saturday, May 12th, 2012 at 5:45 pm under News and Press.
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