Bankruptcy Program Designed to Help Student Loan Debtors

Could U.S. Bankruptcy courts in Illinois learn from a new bankruptcy program in Florida that is designed to help student loan debtors? According to a recent article in the Orlando Sentinel, the U.S. Bankruptcy Court for the Middle District of Florida has developed a program for consumers with student loan debt who have filed for Chapter 13 bankruptcy. The program is designed to facilitate communication between the debtor and the lender so that the debtor can work out a modified student loan repayment plan as part of the Chapter 13 bankruptcy case. While this program is only available currently to debtors in Florida, we want to discuss it because a similar program ultimately may be able to help struggling student loan borrowers in the Chicago area.

Purposes of the Student Loan Modification Program
The student loan modification program, or SLM Program, will take effect for eligible debtors on August 1, 2019. According to the administrative order prescribing procedures for the program, it is designed for Chapter 13 bankruptcy “debtors and their student loan lenders to seek repayment options through a student loan modification program.”

Its overarching purpose is to “create a forum for debtors and lenders to discuss consensual repayment options for student loans,” but it also has numerous other goals. The following are cited as goals of the program within the administrative order:

  • To facilitate communication;
  • To exchange information in an efficient and transparent manner; and
  • To encourage the parties to finalize a feasible and beneficial agreement.

With more than 44 million Americans struggling with student debt, the Middle District of Florida recognized the need for a program that would allow debtors in Chapter 13 bankruptcy to use the bankruptcy court to manage their student loans in addition to other debts. While student loans can be dischargeable in a consumer bankruptcy case, it is often very difficult to have federal or private student debt discharged.

While federal lawmakers are currently considering revisions to the U.S. Bankruptcy Code that could address the difficulty of discharging student loans in bankruptcy, specific districts like the Middle District of Florida are developing plans to help ease the struggle of repaying student loans.

Eligibility for the SLM Program
While the SLM Program currently is available only to debtors in 35 counties within the state of Florida, it could gain national attention in such a way that districts across the country begin implementing similar programs.

To clarify, only debtors who file for Chapter 13 bankruptcy are eligible. Since Chapter 13 bankruptcy is a “reorganization” bankruptcy that allows debtors to create a multi-year repayment plan to pay debts and to be eligible for a discharge at the end of that period, the SLM Program gives debtors the ability to work with the lender to develop a similarly revised or modified student loan repayment plan.

It is important to highlight that debtors with federal loans, and even debtors who are presently repaying loans under an income-driven repayment (IDR) plan, would be eligible for the SLM Program. Given that many discussions about student loan debt revolve around private loans, debtors should know that relief also may be available when they are struggling with federal student loan debt.

Contact a Bankruptcy Lawyer in Oak Park
If you are struggling with debt in Oak Park and want to learn more about options that may be available to you, it is important to reach out to an Oak Park bankruptcy attorney. A consumer protection advocate at our firm can answer your questions today. Contact the Emerson Law Firm for more information.



See Related Blog Posts:

Creditor Objections to a Chapter 7 Bankruptcy Discharge

Is Current Bankruptcy Law Hurting Disabled Veterans and Other Vulnerable Consumers?

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