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Could the proposed Chapter 10 bankruptcy law be the answer?

On Behalf of | Feb 2, 2021 | Bankruptcy Law |

Relief may be in the offing for many former students in Oklahoma who are saddled with college debt. The recent legislation proposal in Congress allowing a new chapter of bankruptcy for those with overwhelming student loan debt could potentially help many who have major financial issues. The most interesting aspect is that it is being established as a form of bankruptcy as opposed to a debt forgiveness plan. The same ramifications of filing will more than likely be part of the law, which means that credit ratings will be impacted for petitioners. In addition, some filers may not qualify without a repayment plan when their income exceeds exemption levels.

Unsecured debt discharge

A Chapter 10 bankruptcy petition will potentially be handled similarly to a Chapter 7 bankruptcy, but the parameters for qualification could differ. As with any other new legislation, there will assuredly be some strings attached. The biggest string for the proposal is that student debt is allowed as an included discharged unsecured debt, which means that the filer’s entire credit rating and financial status are affected. All repercussions of any bankruptcy will still be in place. This alone could deter individuals from taking advantage of the new chapter.

Facing opposition in Congress

There are many budget hawks in Congress that do not agree with this new addition to unsecured debt bankruptcy policy, so the new legislation proposal will be seriously discussed on the floor and behind the doors of each representative. While the House of Representatives may well approve it, the Senate will be another story. This issue was a hot button topic during the election cycle, and there will clearly be some who will vote against it to maintain popularity in their representative district at home.

How an attorney can help

The fact that student loan debt discharges will be included in a complete bankruptcy filing means the petitioner could still want legal representation throughout the process. Having an experienced Oklahoma bankruptcy attorney can be a real advantage when both preparing the petition and seeing it through to approval from a magistrate.