America’s Bankruptcy System ‘Fundamentally Bad’ When It Comes To Student Debt
Debtors who file personal bankruptcy often find it difficult to successfully include student debt for release, and Senator Elizabeth Warren (D-MA) thinks the current system is “fundamentally wrong”.
“When someone goes bankrupt, right now they can write off credit card debt, they can write off medical debt, they can write off excess debt on their car loan, they can write off debt that is more than the dollar value. ‘a house he could have, but it’s virtually impossible to write off student loan debt… that’s basically wrong, “Warren told Yahoo Finance (video above). student loan should be canceled in bankruptcy. “
House Judiciary Committee Chairman Jerry Nadler (D-NY) and Warren previously introduced the “Consumer Bankruptcy Reform Act of 2020,” which proposes to replace the current Chapters 7 and 13 personal bankruptcy systems with a single system , Chapter 10, which would include broader eligibility for the discharge of student loans in bankruptcy.
Yahoo Finance has recounted cases of debtors successfully obtaining discharge of their student loans in bankruptcy court, including stories of a Nebraska grandmother, a former Arkansas public servant, and a graduate in medicine who failed to get a job in the field.
And while these cases highlight the emerging trend for student loan borrowers to find relief through personal bankruptcy, Warren noted that discharge through personal bankruptcy is not a scalable solution.
Bankruptcy Student Debt Relief “should be there for extreme cases … sometimes people who have $ 200,000 in student loan debt because they haven’t paid for a long time.” And it’s the interest and penalties that’s accrued – they are And they have very, very little income. These are people for whom bankruptcy makes a lot of sense. “
Warren, who chairs the Senate Banking, Housing and Urban Affairs Committee on Economic Policy Subcommittee, stressed that any bankruptcy reform should include a large forgiveness of existing student debt.
“Bankruptcy doesn’t make sense” for most borrowers, Warren said. “For everyone else, the federal government shouldn’t be throwing people into bankruptcy to try to pay off regular student loan debts. It’s time to write off $ 50,000 in student loan debt.
Warren and Senate Majority Leader Chuck Schumer (D-NY) have both repeatedly urged a skeptical Biden to write off $ 50,000 in student loan debt held by the federal government via executive action (per opposition to legislation passed by Congress).
Recently, White House Chief of Staff Ron Klain says Politico that the president asked the Secretary of Education Miguel Cardona to “prepare a note on the legal authority of the president” before any decision.
Aarthi is a reporter for Yahoo Finance. She can be contacted at firstname.lastname@example.org. Follow her on Twitter @aarthiswami.