New Bill Proposes Discharging Student Loan Debt for “Medically Distressed” Consumers

When an Oak Park consumer files for personal bankruptcy, he or she typically will be able to discharge medical debts.  However, as we’ve told you previously, it’s a lot more difficult—although not impossible—to have student loan debts discharged.  Yet some lawmakers believe that people with substantial student loan debts who have been working to pay off their medical bills should be able to discharge their student loans more easily.
According to a recent article in the Wall Street Journal, a new bill, the Medical Bankruptcy Fairness Act, “would allow people to get rid of their student loan debt if they have paid more than $10,000 in medical bills during the three years before bankruptcy.”  How many consumers are we talking about?  Based on research conducted by a law professor, “more than half of the people who’ve filed for bankruptcy in recent years would qualify.”
Senator Sheldon Whitehouse of Rhode Island initially introduced the Act, emphasizing that student loan debts shouldn’t be treated differently from other debts during consumer bankruptcy proceedings.  The Senator described the people who would benefit most as “medically distressed debtors.”  He explained that, without the Act, it’s almost impossible to get rid of student loan debts through bankruptcy, and even if you’re able to do it, you’re likely to spend thousands of dollars in the process.  If the new bill were to pass, consumers wouldn’t have to convince a bankruptcy judge that they’re unable to pay off their student loan debts, which is how the system currently works.  Instead, those loans simply would be eligible for discharge under certain conditions.
Legal Scholars and Lawmakers Back the Bill
Daniel Austin, a law professor at Northeastern University, believes the bill could help a lot of Americans.  According to Austin, “more than half of the people who file for bankruptcy these days have enough medical debt to qualify for the student loan discharge.”  Indeed, the average consumer who files for bankruptcy has spent nearly $9,000 over the course of the past year on medical bills—and that number doesn’t include all three years prior to the bankruptcy filing.
How many of those people also have student loans?  Austin indicates that it’s about 30 percent.  According to the article, more than 170,000 people or couples who filed for a Chapter 7 or Chapter 13 bankruptcy in 2013 would have been eligible to have their student loans discharged under the proposed bill.
Will the bill pass?  Commentators believe it’s unlikely to pass, “thanks to strong opposition from the financial-services industry lobby.”  In the past, the lobby helped to defeat a proposal aimed at giving bankruptcy judges more power to modify a homeowner’s mortgage terms.  And as of right now, the bill only has two clear supporters: Senator Elizabeth Warren and Senator Richard Durbin of Illinois.
The bill is actually several years old, but Senator Whitehouse’s proposed student loan relief is a new provision within it.  Other new provisions include a proposal aimed at helping “medically distressed debtors” to keep their property with a $250,000 homestead exemption.
If you’re thinking about filing for personal bankruptcy, it’s important to speak to an experienced Oak Park bankruptcy attorney.  Bankruptcy law can be complicated, but the dedicated attorneys at the Emerson Law Firm assist consumers every day.  Contact us to learn more.
See Related Blog Posts:

Comments

Post a Comment

Popular posts from this blog

Payday Lending and Predatory Lenders in Illinois

If you are in substantial debt in the Chicago area and are living in a paycheck-to-paycheck cycle, you may have taken out a payday loan to make ends meet. While payday lending is illegal in a number of states due to the predatory nature of these loans, it remains legal in Illinois. As a result, many debtors in the state have used payday lenders, and far too many of those borrowers cannot repay what they owe. According to a recent article from Progress Illinois , consumers have filed complaints about payday lenders in the state, illuminating a need for federal rules that address harmful lending practices . Predatory Payday Lenders and Protections for Consumers Due to the perceived predatory nature of payday loans, twelve states in the country have banned these lenders from operating completely, according to a fact sheet from loans.org . The states that currently have laws prohibiting payday lenders from operating include Arkansas, Arizona, Connecticut, Georgia, Mary...
Read more

Phantom Debt Collection Scams on the Rise in Illinois

Have you been contacted by a person claiming to be a debt collector who is seeking to recover a debt you allegedly owe? If so, you are not alone. According to a recent report from CBS Chicago , such parties claiming to be debt collectors are on the rise, and they are scamming Chicago-area residents. These alleged debt collectors are part of schemes known as “phantom debt collection scams,” since they involve the attempt to collect on a debt that the consumer does not actually owe. How can you avoid becoming a victim in a debt-collection scam ? What should you do if you have been targeted by a fake debt collector? How Do Phantom Debt Collection Scams Work? Now, you might be thinking to yourself: I would never agree to make payment on a debt that I did not owe. But the scam is not always that simple. Parties at the center of debt-collection scams often target consumers who do actually owe debts (to someone or to some entity), and they prey on the fact that these c...
Read more

New Information on Debts That Bankruptcy Cannot Discharge

If you are thinking about filing for bankruptcy in the Oak Park area, it is important to know that certain kinds of debts cannot be discharged in a bankruptcy case. Under U.S. bankruptcy law, these are known as non-dischargeable debts, or exceptions to discharge. There are certain types of debts that have long been identified clearly as non-dischargeable debts, while there are misconceptions about other types of debts that may or may not be dischargeable. As an article in CNBC discusses, the U.S. Supreme Court recently issued a ruling in the case of Bartenwerfer v. Buckley , which clarifies that debts incurred due to another party’s fraud cannot be discharged in an individual’s bankruptcy case. Our Oak Park bankruptcy attorneys can explain the Court’s recent ruling and provide you with additional information on dischargeable and non-dischargeable debts. Supreme Court Says Debt Incurred Due to Another’s Fraud is Non-Dischargeable The recent Bartenwerfer case involved a debtor attempti...
Read more