More proof that if it sounds too good to be true, it usually is: Contrary to what you may read in the mainstream media, there are not “a lot” of instances in which students who are savvy enough to ask to discharge their student loan debts are allowed to do so. (“Debunking the Student Loan Bankruptcy Myth,” August 13, 2014).
In reality, the United States is crippled with what has been termed a “student loan debt bomb.” Americans have accumulated more than $1.2 trillion in student loan debt, exceeding even the level of credit card debt in our nation. Because federal law treats student debt as non-dischargeable in bankruptcy proceedings, borrowers can be burdened with this debt for a lifetime even if they are unable to repay.
Federal law does provide that bankruptcy discharge is available for student loans in cases of “undue hardship.” But there’s a big gap between what is theoretically possible and what happens in the real world. The path to an undue hardship discharge is often blocked by U.S. Department of Education contractors, which aggressively challenge debtors’ efforts to show undue hardship. Too often, what we see in bankruptcy courts is federal education contractors using their legal muscle and ability to drag things out in order to crush hardship cases.
The U.S. Department of Education needs to take charge of the situation and make it clear that the over-the-top hardball tactics of its contractors are out of line. Students, parents, educators, lawmakers and other concerned citizens should encourage Congress to restore meaningful and workable bankruptcy protections for student loans, so that those in real need are able to get a fresh start, rather than being devastated for life by insurmountable student loan debt.
About the Author
Edward C. Boltz is a member of the Law Offices of John T. Orcutt, P.C., where he has managed the firm’s office in Durham, North Carolina since 1998, representing clients in not only Chapter 13 and Chapter 7 bankruptcies, but also in related consumer rights litigation, including fighting abusive mortgage practices.
In addition to serving on the Board of Directors for NACBA, Mr. Boltz serves on the Bankruptcy Council for the North Carolina Bar Association and previously served as the Bankruptcy Chair for the North Carolina Association of Trial Lawyers. Mr. Boltz moderated the panel “Military Members Deep in Debt” at the 2007 NACBA Convention. Mr. Boltz served as the Convention Chair for the 2008 NACBA Convention in Hollywood, as well as moderating a panel on Basic Bankruptcy Issues. Mr. Boltz’s term as NACBA’s President commenced January 1, 2013.
In April 2008, Mr. Boltz testified on behalf of NACBA in Congress regarding the need for changes to the bankruptcy code to protect National Guard and Reservists returning from Iraq and Afghanistan from the harsh results of the Means Test, which was enacted as the National Guard and Reservists Debt Relief Act.