Many people in Pennsylvania are still making payments on student loan debt that they acquired more than 10 years ago. Big universities can run people into massive debt that is difficult to repay even with a high-paying job. If you have other debt besides student loans, your financial situation can get even more tenuous.
New bill could provide relief for student loan debt
Right now, the process for having student loan debts forgiven in bankruptcy is much more complicated and difficult than having other debts forgiven. As a result, most people do not try to include student loan debts in their bankruptcy filing, or if they do, the debts are not forgiven.
A new bill called the Consumer Bankruptcy Reform Act of 2020 would make it easier to have student loan debts discharged. If the bill is adopted, there will be a new provision in Chapter 10 bankruptcy that would essentially lump student loans in with easily dischargeable debts like medical expenses, payday loans and credit cards.
New bankruptcy provision would affect a lot of people
If the bill is passed, it could potentially impact 45 million people in the United States who have student loan debt. The total amount of debt that could be discharged if every one of these people filed for bankruptcy is around $1.7 trillion. However, it is unlikely that all of the people who owe money on their student loans would choose to immediately file for bankruptcy if the bill is passed.
Who should file for bankruptcy?
Bankruptcy has a lot of benefits, but it also comes at a cost. A person who is considering bankruptcy should weigh the pros and cons carefully and speak with a lawyer to analyze their unique financial situation.
While bankruptcy will harm your credit score in theory, there are some individuals whose credit scores are already very low because of delinquencies. A person who already has damaged credit and cannot keep up with their bills may be a good candidate for filing for bankruptcy.