Nearly everyone today has student loan debt. In fact, a student loan repayment plan may be one of the most solid and sure long term relationships many of us enter into. While many people manage to get by making payments over the course of their loan, if something unexpected were to happen—like the loss of a job or a major medical emergency—most of us would be scrambling to figure out what to do.
Currently, bankruptcy laws do not offer much protection from student loan debt, but Democratic legislators are currently jumping onboard Elizabeth Warren’s bandwagon to push bankruptcy law to allow forgiveness of private student loans in bankruptcy. While a very small percentage of student loans are from private lenders, this still shows an interesting shift in current policy.
While motions to get any bills passed will not likely occur anytime soon, this latest attempt has sparked a lot of debate. Questions have risen about how cosigners will be treated in the event of the borrower declaring bankruptcy, and in order for the loan to be discharged, the cosigner may have to declare bankruptcy, as well.
One benefit that has been discussed with the potential passage of this bill is that lenders will raise credit standards for issuing loans. If lenders are able to more closely appraise a potential borrower’s finances—and therefore potentially predict the likelihood of a future bankruptcy—interest rates may be able to stay lower since each borrower is a lower financial risk for the lending institution.
The Phoenix bankruptcy lawyers at Curry, Pearson & Wooten are eager to follow the progression of this new legislation, and see the impact that it is sure to have in upcoming elections.