For what seems like forever, laws pertaining to student loan debts showed no signs of change, heavily favoring creditors over debtors, and placing extreme financial strain on the latter. Fortunately, with the Bankruptcy Fairness Act of 2023, it seems that the tides are finally turning!
Both the borrowers and debt attorneys in San Diego welcomed this piece of legislation with open arms, as it reopened several legal avenues that enhance debt relief efforts. Today, we’ll be exploring the implications of this Act to see in what ways it benefits debtors in California.
What is the Bankruptcy Fairness Act of 2023?
To better understand what the Fairness Act of 2023 brought to the table, first, we must start with a bit of history. Prior to 2005, the bankruptcy system treated private student loans like any other type of unsecured debt, such as medical bills, credit card debt, or personal loans.
This meant that, when a person filed for Chapter 7 or Chapter 13 bankruptcy, private student loans could be discharged. Considering how exorbitant these amounts could (and still can) get, discharging them effectively meant that a person could restart their life by choosing bankruptcy as the first option.
Then, the 2005 bankruptcy reform was introduced. This piece of legislation prevented the discharge of private student loan debt, except through an excruciating process of proving undue hardship, thereby tipping the scales heavily in favor of private, profit-oriented lenders.
Almost 20 years later, on September 01, 2023, Congressman Steve Cohen reintroduced the Private Student Loan Bankruptcy Fairness Act (H.R. 138), reverting the unfair state of the bankruptcy system to its pre-2005 status.
Passing this legislation ushered in a new era of financial relief efforts for individuals with high amounts of student loan debt, making filing for bankruptcy not only a viable – but feasible lifeline and a chance for a fresh start.
Will student loans be discharged?
While the Fairness Act of 2023 undoubtedly introduced some welcome and long-awaited improvements, it failed to address one major controversy in the US bankruptcy system: the relationship between undue hardship and the costs of filing for an adversary proceedings lawsuit. Herein lies the problem:
- Individuals who are most likely to be granted discharge qualify under the stringent undue hardship criteria, meaning that they’re already in an extremely difficult financial situation;
- Individuals who pass the undue hardship test are highly unlikely to be able to afford to file for adversary proceedings or hire a litigation attorney to represent them.
In other words, discharge will most likely be granted to individuals who are on the verge of poverty, but have money to finance the proceedings.
This, and the fact that the Fairness Act of 2023 targets only private student loans without addressing federal ones in the slightest, means that new procedures won’t significantly reduce the number of people who qualify for discharge.
Despite its faults and oversights, this piece of legislation is still able to provide a welcome reprieve to those whom it affects. As such, it is definitely a step in the right direction as it acknowledges the necessity of addressing student loan debt and the challenges that come with it.
Where to find trustworthy debt attorneys near me in San Diego?
If you’re looking for the most reliable, resourceful, and responsive legal team west of Mission Trails RP, look no further than the Bankruptcy Law Offices of Mark L. Miller. Over the course of their tenure, our ethical attorneys solved more than 12,000 student loan debt cases to the ultimate benefit of our clients.
We personalize our legal strategies based on your unique needs and circumstances, sparing no effort or resource to procure evidence that will give you the best possible chance of success. Contact us today to schedule your free consultation and ensure you have a partner whose sole mission is to secure your well-being!