Oak Park Real Estate & Estate Planning Blog

Anyone who is considering the possibility of filing for consumer bankruptcy in light of the new guidance from the Biden administration and the U.S. Department of Justice should learn more about what is involved in the process of seeking a discharge of student loan debt in bankruptcy. You should get in touch with one of our Oak Park bankruptcy attorneys to find out more about having student loans discharged in bankruptcy given your particular circumstances. In the meantime, the following are some of the top things for you to consider about student loans and bankruptcy. New Guidance Has Been Issued As we noted above, new guidance on discharging student loans in bankruptcy has been issued. Specifically, the new guidance addresses the process for a debtor to seek to have student loans discharged, and the process by which the Department of Justice and Department of Education will determine the debtor’s eligibility for a discharge. Most significantly, the process will now involve an “attes...

If you are struggling with student loan debt and have been wondering if you could be eligible to have that debt discharged in a consumer bankruptcy proceeding , you are not alone. Debtors across Oak Park and throughout the Chicago area have substantial student loan debt that makes it difficult to or even impossible to live a comfortable life. For many people with student loan debt, even federal loans can be difficult to repay, and forgiveness programs are difficult to understand and to navigate. While you may be considering personal bankruptcy, you also may know that it has traditionally been quite difficult to have student loan debt discharged in a bankruptcy case. Debtors need to pass a test that shows they have made a good faith attempt to repay their student loans, and that continuing to have the student loan debt would create a great hardship. Recognizing the difficulty of discharging student loan debt in bankruptcy —and the need to make this process easier—consumer advocates an...

Debtors in Oak Park who are considering personal bankruptcy to discharge student loans should learn more about a recent bankruptcy case in New York. Although this case is not binding in Illinois, it demonstrates that bankruptcy judges are thinking about the “undue hardship” requirement in more flexible ways, allowing debtors to discharge student loan debt in a Chapter 7 bankruptcy case. According to a recent article in Forbes , this bankruptcy case involving the discharge of student loan debt could be a sign that bankruptcy courts across the country will begin looking at student debt a bit differently in Chapter 7 bankruptcy cases. Let us tell you more about the case. Chapter 7 Bankruptcy Case Involves Discharge of $221,000 in Student Loans The recent bankruptcy case discussed in Forbes involved the discharged of $221,000 in student loan debt. Many debtors in Illinois and across the country have heard that it is difficult—and maybe even impossible—to discharge student loan debt in...

If you currently are struggling to repay student loan debt, you may know that you are not alone. With student loan debt totaling approximately $1.5 trillion dollars and 45 million borrowers in the U.S., many people who are having difficulty managing student loan debt want to know if they should file for consumer bankruptcy . Indeed, as an article in Forbes underscores, student loan debt currently is “the second highest consumer debt category—behind only mortgage debt—and higher than both credit cards and auto loans.” At the same time, however, many consumers who are grappling with student loan debt have heard that discharging student loans in bankruptcy can be difficult or even impossible. A recent report from U.S. News & World Report considers student loans and bankruptcy, and discusses situations in which debtors should consider filing for personal bankruptcy in order to discharge student loans. It is a Myth That Student Loans Cannot be Discharged in Bankruptcy The recent re...

Is Chapter 7 bankruptcy currently the best decision in a situation in which a large percentage of debt is made up of student loans? A recent article in Diverse Education highlighted the fact that it is often difficult to have student loans discharged in Chapter 7 bankruptcy, and that a large percentage of debtors with student loan debt do not actually end up with the financial “fresh start” that liquidation bankruptcy typically promises. As the article points out, for those debtors with student loan debt who recently filed for bankruptcy, on average student loan debt made up about 49% of the debt. For a majority of those debtors, student loan debt remained after the Chapter 7 bankruptcy discharge . Given that student loan debt is making up a larger percentage of debt in liquidation bankruptcy cases and frequently is not being discharged, consumer protection advocates are asking whether Chapter 7 bankruptcy can really provide a “fresh start” without a change to the bankruptcy rules...

Earlier this year, we discussed plans within the U.S. Department of Education (DOE) to hire private debt collection firms in order to track down delinquent student loan debtors. However, according to a recent article in U.S. News & World Report , the DOE “may sever ties with private debt collection firms.” What does this mean for student loan borrowers, and will it have any impact on debt collection practices ? Potentially Good News for Federal Student Loan Borrowers The news that the DOE may cut ties with third-party debt collection companies could be good news for federal student loan borrowers who are currently in default. According to the article, consumer advocates have emphasized that debt collection tactics for past-due federal student loans have been problematic in many ways. In perhaps the least harm—albeit harmful nonetheless—debt collection methods, collectors have not given borrowers clear information about alternatives that could be available to help t...

Attorney General Lisa Madigan’s Office drafted the Illinois Student Loan Bill of Rights (SB 1351), which was sponsored by Sen. Daniel Biss and Rep. Will Guzzardi. We discussed the legislation with you back in May when the proposed legislation went through the Illinois state legislature. The bill was designed to prevent unfair debt collection practices and abusive loan collection tactics . However, according to a recent press release from Madigan’s office, Illinois Governor Bruce Rauner has vetoed the bill. What does the Attorney General’s office have to say about this? What does the veto mean for student loan borrowers in Oak Park and throughout Chicagoland? Reasons for the Student Loan Bill of Rights As many Illinois residents know, debtors across the state are struggling with student loan payments. The press release highlights that student loan debt represents “the largest form of unsecured debt in the country.” Currently, there are more than 40 million borrowers t...

For quite some time, commentators and consumer protection advocates have voiced concerns about student loan debt . According to a recent report from CNBC , student subprime debt has risen drastically over the last year, contributing to the trillions of dollars of student debt throughout the country. As an article in MarketWatch explains, some student borrowers, especially those who took out student loans to pay for for-profit colleges, may be more similar than we might think to “homeowners who used shady mortgage products to finance their homes in the lead up to the housing crash.” Indeed, “borrowers who took out student loans to attend for-profit schools defaulted at the same or higher rate within five years as those with subprime mortgages.” Now that the numbers reflect a surge in student subprime debt, what can we expect for borrowers who owe money on these loans? Is personal bankruptcy ever an option for student loan debt? Student Loan Debt Rises While Creditw...

Are there state-specific protections in place to prevent student loan borrowers from abusive debt collection practices ? The Fair Debt Collection Practices Act (FDCPA) provides protections at the federal level, but according to a recent article in Consumer Affairs , Illinois Attorney General Lisa Madigan is supporting a bill that is designed to provide specific consumer protections in the state of Illinois. More specifically, the proposed legislation, Senate Bill 1351 , is designed to “create a Student Loan Bill of Rights to protect borrowers from abuse.” What protections would the bill provide on a more specific level, and what else needs to happen for it to become law? Bill Passes in the Senate As the article explains, SB 1351 has already passed in the Illinois Senate by a 34 to 15 vote. It is now time for the bill to be considered by the Illinois House of Representatives. Attorney General Madigan’s office drafted the bill along with Senator Daniel Biss. Repre...

According to a recent press release from the Consumer Financial Protection Bureau (CFPB), millions of consumers have filed complaints about student loan servicing practices. The CFPB’s “monthly complaint snapshot” for April underscored “that both private and federal student loan borrowers nationwide report persistent servicing breakdowns that may sideline their path to repayment.” In other words, student loan borrowers have continued to file complaints with the CFPB about problems with the companies servicing their student loans. In some cases, it is possible that student borrowers are protected by the Fair Debt Collection Practices Act (FDCPA). We often read about student loan complaints when it comes to private lenders. However, as the recent press release emphasizes, student loan borrowers are having difficulties with servicers linked to private and federal loans alike. To better understand the nature of the complaints, we would like to take a closer look at the CFPB’...