Should Student Loans Be Discharged in Bankruptcy

The Law Office of Malik Ahmad has already published few articles not only about bankruptcy Chapter 7, but also about student loans. We know this is a painful topic which requires Obama government’s immediate attention, but somehow it has been placed largely on bank benches. This is as high an item as loan modification, foreclosure or health care. This issue has crippled student lives. The student loans debts are rising, and this mountain of debt is crushing students and of course their daily lives. It should be addressed as a priority by the Obama administration.

This is a very valid question. The present standard for discharge of student loans is very strict and very rigorously enforced especially for private student loans. At least the wage garnishment should be based with the judgment from a judicial panel. At this time, no such condition is required, which is making the lives of students very miserable in this very high unemployment time. In California, however, headway is being made where a Bill has been introduced by Assemblyman Bob Wieckowski that would make private lenders unable to use wage garnishment as a method to collect on delinquent student loan debts. This bill is still in the very early stage (AB233). One wonders if such a bill should be passed by Nevada legislature as well because there is a big need for such stoppage. A similar bill has been placed whereby the home foreclosure has been placed in limbo, and that has really worked to improve the home conditions in Nevada. Remember, Nevada used to be numero uno in foreclosure. A few years ago, the private student loans were discharged in bankruptcy. What exactly is a private student loan? This determination should be made by the bankruptcy court and not by the department of education or by the lenders themselves. We also support that at least 50 percent of the principal student loan and 50-70 of late fees, and penalties should be waived from the student loans.



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