Millions of Americans are becoming more and more familiar with student loan debt. Reports abound that show people everywhere, including in those San Diego, are borrowing for higher education much more than they ever have before. And some are learning more than they would like to know -- like how student loan debt, in the vast majority of cases is not dischargeable through a bankruptcy.
It is a topic that is coming to the forefront much more as the overall dollar amount owed on outstanding student loans surges. And within the last few years, there have been whispers of attempts to include some student loans in the purview of the bankruptcy code.
Now, it appears, those who would like to see student loan debt discharged through bankruptcy have a new and more forceful advocate -- President Obama. It was recently reported that he has pushed Congress to revise the bankruptcy code to allow some student loans -- those issued through private lenders only -- to be discharged through a bankruptcy filing. These private student loans make up approximately 15 percent of student loan debt in the country.
When someone files for bankruptcy, whether it is through a Chapter 7 or Chapter 11 process, that person is looking to make a fresh start. The discharge of debts, while providing the relief and space necessary for an individual or family to start over, already comes with a big black mark on a person's credit report. But without being able to discharge student loan debt, it is conceivable that the burden a bankruptcy seeks to lift could come up short.
This is just the beginning of the political debate on this topic, but the idea of being able to discharge private student loan debt through bankruptcy appears to have some serious support.
Source: The Wall Street Journal, "Obama Administration Backs Bankruptcy Option for Some Student Debt," Josh Mitchell, July 20, 2012