Mass AG and Bar Association Lead Way to Help Student Loan Debtors File Bankruptcy

This recent release from the Massachusetts Attorney General office caught my eye. Wow!

What makes this announcement so refreshing for me is it directly speaks back to all those lawyers and consumers who incorrectly insist there are no options for student loans in bankruptcy. There are.

AG Healey Partners with Mass Bar Association, Greater Boston Chamber of Commerce to Announce Student Loan Bankruptcy Assistance Project

Taking a new approach to the problem of unrepresented student loan borrowers facing personal bankruptcy, Attorney General Maura Healey announced the launch of a statewide Student Loan Bankruptcy Assistance Project with the Massachusetts Bar Association (MBA) and the Greater Boston Chamber of Commerce.

The new initiative – a product of the Student Debt Working Group launched in 2016 by AG Healey and Greater Boston Chamber of Commerce CEO Jim Rooney – will match a panel of pro bono attorneys and law firms with distressed students who may be eligible to have student loans discharged in bankruptcy. The MBA will recruit and train volunteer attorneys to work with borrowers in need.

“The student debt crisis is a significant challenge that we face as a state and as a country, making it difficult for students and families to invest in their future,” AG Healey said. “This project will benefit some of our most distressed student borrowers – people who can’t afford the legal services they need and have nowhere else to turn. I thank Massachusetts Bar Association and the Greater Boston Chamber of Commerce for their partnership in helping student borrowers get their financial lives back on track.”

“Unrepresented people present a challenge to all participants in the bankruptcy system: creditors, court personnel, the judges, and of course to the debtors themselves,” said U.S. Bankruptcy Judge Frank Bailey. “We as a court have long offered resources, regular clinics, and referrals to a network of legal aid agencies where debtors can receive free legal representation. I welcome the addition of the Massachusetts Bar Association’s Student Loan Bankruptcy Assistance Project to the roster of free legal services available to unrepresented debtors and commend Attorney General Maura Healey for her leadership on this important project.”

“Student debt has become a real crisis for many low-income borrowers, including attorneys and others who work in the public interest or for a non-profit,” said MBA President Christopher P. Sullivan. “Our Student Loan Bankruptcy Assistance Project will make sure these folks have someone in their corner as they seek relief from the massive weight of their student debt.”

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“The MBA’s resources are fully committed to this project, and the lawyers on the MBA’s litigation panel are ready to accept cases now,” said Francis C. Morrissey, co-chair of the MBA’s Student Loan Bankruptcy Assistance Project. “Anticipating the growing need for legal assistance in this area, we will also offer additional training later this spring to lawyers who wish to volunteer.”

“Reducing the burden of student loan debt is a critical issue for our region as we focus on developing and maintaining our reputation for having the most talented workforce in the world,” said James E. Rooney, President and CEO of the Greater Boston Chamber of Commerce. “We are so proud of the work being produced by the Student Debt Working Group, and we are incredibly grateful to the MBA’s leadership in creating this Student Loan Bankruptcy Assistance Project as well as to the lawyers who will volunteer their time to provide support to student borrowers experiencing hardships.”

Under current law, the Bankruptcy Code provides for the discharge of student debt only upon a showing of “undue hardship” on the debtor and his or her dependents. Because the legal standard for discharge of a student loan in bankruptcy is onerous, very few people – even of those who pursue bankruptcy to discharge other debt obligations – seek to discharge their student loans.

Pursuing student loan discharge through bankruptcy can be complicated for many eligible student borrowers who are not able to effectively represent themselves or afford the representation they need. Analysis of bankruptcy filings has demonstrated that borrowers with knowledgeable representation have a much greater likelihood of success than borrowers without counsel.

As part of the new Student Loan Bankruptcy Assistance Project, the MBA has established a panel of volunteer attorneys and law firms willing to represent student borrowers in adversary proceedings seeking to discharge student debt in their bankruptcy cases. Attorneys will consider the student’s current and future inability to pay and any other factors that may affect that ability over the long term, in preparation for a possible bench trial.

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Student borrowers will be referred to the program from a variety of sources, including the Attorney General’s Student Loan Assistance Unit, the National Consumer Law Center, the Volunteer Lawyers Project, and members of the consumer bankruptcy bar. In addition, the MBA will create a web page that borrowers can visit, which will have helpful information about the program, including how to request pro bono assistance from the panel.

Over the past year, the Student Debt Working Group – which has brought together leaders from the business community, non-profits, and government to exchange ideas for improving access to higher education – have come together to discuss strategies to reduce unaffordable debt, increase transparency in student lending, and learn about programs at colleges and universities to create more affordable paths to graduation and into the workforce and help employees manage and repay their loans.

In November, AG Healey and Greater Boston Chamber of Commerce CEO Jim Rooney issued a report highlighting the group’s accomplishments, recommendations, and initiatives underway to help student borrowers and address the student loan debt crisis.

Massachusetts borrowers who are looking for student loan help or information should visit the AG’s Student Lending Assistance page or call AG Healey’s Student Loan Assistance Unit Hotline at 1-888-830-6277.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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