Recently American Bankruptcy Institute’s Commission on Consumer Bankruptcy proposed new changes. These proposed changes are part of the 247-page report, released on Wednesday by prominent members of the bankruptcy community, including former judges, representatives of academic institutions and lawyers from both the debtor and creditor sides. If these new proposed changes in bankruptcy rules take hold, getting out from the crushing student loan debt would be a little easier. The report has discussed issues like attorney fees, rainy day funds for debtors with unexpected expenses and the disproportionate number of African-American users in a certain type of bankruptcy.
Generally, bankruptcies are meant to get a debtor’s financial matters together by paying creditors the due amount under court supervision. Most of the time court opt to choose chapter 7 petition, where assets are sold off, proceeds go the creditor and debts are discharged or chapter 13 which arrange installment payment plans. In 2018, bankruptcy petitions hit the lowest mark since 2007. The rates dipped as the 10-year investors market showed a changed pattern and unemployment hit the lowest point in 49 years. But the legal observers have a different stance on this. They believe that there were other issues related to the low numbers. One of these were high legal fees and court costs. The report also gives a few solutions on how to deal with the payment issue.
Bankruptcy code hasn’t been updated since 2005. American’s total student debt wasn’t huge at that time. But that was then. Now American students owe $1.5 trillion in student loan. The report also suggests that lawmakers should reform the bankruptcy code. The report suggests dramatic changes to the treatment of student loans, including a proposal that would let borrowers discharge student loans in bankruptcy 7 years after they became payable. The report also reiterated a proposed change to the bankruptcy code. It would allow borrowers to discharge private student debt loans in bankruptcy.