This spring, news about student loan debt has been taking front and center stage, and all good bankruptcy attorneys in Indiana are paying close attention.
The issue itself is hardly new. In these Bankruptcy in Indiana articles, I’ve pointed out many times that the new bankruptcy laws of Indiana, which follow federal guidelines, generally do not allow for student loans to be discharged in bankruptcy. The ongoing efforts of Senator Dick Durbin to change the situation is something all of us in the Zuckerberg bankruptcy law offices heartily applaud and support.
The Seattle Times wonders whether “the problem is shaping up to become America’s next economic crisis.” My colleagues the Bloomington, Indianapolis, Anderson, and Columbus bankruptcy lawyers are concerned, too. More and more former students visit us seeking student loan debt help, sometimes (in the worst cases) along with payday loan debt help.
Having served as a debt consolidation lawyer for more than 25 years, I’m glad to see the problem finally getting the attention it deserves. What has been triggering all the latest news is a deadline, only six weeks from now. Yes, on July 1, 2012, the interest rate on federal student loans is scheduled to double. As rates go from 3.4% to 6.8%, a big, bad problem will become even worse.
“Unlike other forms of consumer debt, student loan debt is growing,” points out the Washington Post, adding that “the number of borrowers defaulting on federal loans has jumped sharply recently.”
To put this information in perspective, let me add some qualifiers:
- Loans issued before July 1, 2012 will not be hit with the higher rate.
- The jump in rates will not affect Stafford loans (already at 6.8%) or PLUS loans for parents (now at 7.9%).
Now, if the new bankruptcy laws of Indiana DON”T change and the interest rate hike DOES happen, can filing personal bankruptcy in Indiana help in any way? Make that a “yes”. Here’s how:
Other consumer debt can be discharged through bankruptcy. That is true for both bankruptcy Chapter 7 in Indiana and for bankruptcies filed under Chapter 13 bankruptcy law.) Those discharges can free up cash that can be used towards student loan repayments.
The debates go on, and the news can change every day. Stay tuned here to these Bankruptcy in Indiana articles, so you can stay up to date on student loan debt.
Categorised in: Bankruptcy Indiana
This post was written by Mark Zuckerberg