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Bankruptcy Attorneys Report Major Problems Brewing for Holders of Student Loan Debt

The National Association of Consumer Bankruptcy Attorneys conducted a survey of its members. Of the 860 bankruptcy attorneys that participated in the survey, 81 percent said potential clients with student loan debt have increased “significantly” or “somewhat” in the last three-four years.

Nearly two out of five of bankruptcy attorneys (39 percent) have seen potential student loan client cases jump 25-50 percent in the last three-four years.

Most bankruptcy attorneys (95 percent) report that few student loan debtors are seen as having any chance of obtaining a discharge as a result of undue hardship.

As I’ve been saying, there is a major issue in America today regarding student loan debt. Students are encouraged to take on student loans under the guise of it being good debt, when in fact for many it turns out to be anything but that.

Unaffordable student loans turn into a multi decade problem for students. They can result in wage garnishments without the lender going to court, intercepted tax refunds, not enough money left each myth to live safely, few payment accommodations, and massive collection fees tacked on.

This not only impacts the student but family members that might have cosigned for the perceived to be beneficial student loans.

Dave Ingham, a disabled Vietnam vet who lives outside Minneapolis and co-signed a loan for his son to attend college, said: “I have been personally and gravely affected by the student loan bankruptcy crisis being discussed today. And I know our family is only one of many thousands across America facing these issues. My wife and I live in a condo and she receives barely over $500 per month in social security. Our son has to live with us or else he would be homeless. My wife and I and our son are being sued by a collection agency representing Sallie Mae and are scheduled to appear in court on February 13, 2012. My wife and I stand to lose our assets, including our condo. I realize my son made a mistake by being taken in my predatory lenders but that does not mean his life and ours should be allowed to be ruined by these people.” – Source

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And while student loan debt is a terrible problem, at least government backed loan borrowers have some options to deal with the debt including flexible repayment plans. Private student loan holders are basically left without any options if the run into trouble. That’s why I launched this petition for Congress to take action and pass legislation to help private student loan holders. Sign The Petition Now.

The survey also found:

More than four out of five bankruptcy attorneys (82 percent) see the limited availability of student loan discharge in bankruptcy as “a big problem” barring a fresh start for clients.

Nearly two out of three bankruptcy attorneys (65 percent) say that student loan provider debt collections have become “much more” or “somewhat more” aggressive in the last 18 months.

More than three out of five (61 percent) of bankruptcy attorneys dealing with potential student loan debtor clients have seen cases of debts more than 15 years old still being pursued. – Source


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About the author

Steve Rhode

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.

1 Comment

  • Thank you Steve Rhode for your free advice for disabled adults. I’m so happy I found your website. I’ve learned so much on your website to help me recover from this massive student loan debt hanging over my head and cannot pay due to permanent disability. I really appreciate it.

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