Changes in Bankruptcy Law For student Loans

Student Loans And Bankruptcy New Law - Changes in Bankruptcy Law For student Loans

The course of the Us government is so tailored that student loans for study are in fact available. The corollary is that liberal loan schemes are on the anvil and loans for higher studies are open for all.

Student Loans And Bankruptcy New Law

However while the seventies a different phenomenon had taken place. Students then in large numbers took study loans and accordingly obtained their degrees. But on completion of their courses, before they had got a job the students would file for bankruptcy. The purpose was to get out of the liability to pay back the loan.

They could thus represent to the courts that they had no revenue in their plea of bankruptcy as they were unemployed. Any way to obviate this lacuna and also due to intense pressure the government changed the law and the requirements in 1998. There were added changes in 2005 and hidden loans were also brought within the legal net.

The changes have effectively made it difficult to dismissal student loans with a straightforward plea of bankruptcy. The only condition that can lead to a dismissal of a student loan now is,if the student can prove that repaying the loan would generate an undue hardship on him and his family. Proving this is the accountability of the student himself. Prior to this student loans could be discharged in case they were paid for 7 years but this has also changed since 1998.

Student loans are contracts like any other loan and are branch to laws governing contracts.Thus fraud, misrepresentation etc are open to challenge in a court of law. Another point in students favor is that the students' loans are not enforceable when the school has complete prior to the student completing his education. These challenges could be raised in a part 13 proceeding and decided by a bankruptcy judge.

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