Wiping out student debt through bankruptcy
Student loans are difficult, but not impossible, to discharge in bankruptcy. To do so, you must show that payment of the debt “will impose an undue hardship on you and your dependents.”
Attorney Tom Olsen: What is the latest on student loans being discharged through bankruptcy?
Attorney Paul Urich: Well, nothing new has been passed with Congress or anything, but the Orlando bankruptcy court is working on setting up a modification mediation type solution for this. It isn't all drawn up yet, but it should be done in the next few months and then we're going to be trying to modify student loans, interest rates, and principal and monthly payments and all that just like we did with the mortgage modification program.
Attorney Tom Olsen: Well, that sounds like it would be a huge improvement for people that have student loans and cannot or not able to pay them. That sounds like a huge step to me.
Attorney Paul Urich: Yes. Something has to be done because there are just so many people that have huge student loan debts that they can't even begin to service. They're just growing and growing and getting worse and worse.
Attorney Tom Olsen: This would be available really, that we're only talking about this particular district which happens to be Central Florida. If they do this, well, now I certainly hope that they do, could they force the lenders to modify this student loan debt with the people that owe them?
Attorney Paul Urich: Well, you can't force the creditor to do anything. What you got is you got a Bankruptcy Court judge's order that says, "Mediation is at such and such a date, such and such place, such and such time," and they have to bring somebody to that mediation that can make a final decision.