Student Loan Debt: A Ticking Time Bomb For Ohio Debtors?

Bankruptcy Attorney

Consumer bankruptcy protection offers debt relief against almost all debt types, but one type of debt that can not be managed or eliminated through bankruptcy protection is private student loan debt. The National Association of Consumer Bankruptcy Attorneys, and a large number of members of this organization, share a belief that relief from student loan debt is critical and needs to be put back into place. By failing to address the massive amounts of student debt that consumers face, in Ohio and other states, the NACBA believes that the economy and debtors who owe these debts are both placed at a substantial risk. The NACBA states that “Unmanageable student loan debt threatens to reach crisis proportions in the not distant future if Congress does not restore bankruptcy relief.”


The NACBA released a report on the economic crisis caused by ballooning student loan debt, and the executive summary of this report is very interesting reading. The summary states “Even in the best of economic times when jobs are plentiful, young people with considerable debt burdens end up delaying life-cycle events such as buying a car, purchasing a home, getting married and having children. Piling up student loans in middle age is even more troublesome. Aside from the simple truth that there is less time to earn back the money, it also means facing retirement years still deeply in debt. And parents who take out loans for children or co-sign loans will find those loans more difficult to pay as they stop working and their incomes decline.”


The NACBA goes on to say that “Students and workers seeking retraining are borrowing extraordinary amounts of money through federal and private loan programs to help cover the rising cost of college and training. In many cases, parents responsible for the student loans are in or near retirement years and facing repayment demands.” Bankruptcy attorneys in Ohio are concerned that the student loan debt crisis will quickly follow the foreclosure crisis, and the parallels between these two problems should not be ignored. More consumers than ever before are struggling and need help with debt relief including student loans, but unfortunately there is no relief in sight for many because there is no relief available where student loans are concerned.


When the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, or BAPCPA as it is commonly referred to, was passed a provision was quietly and secretly added that eliminated the ability to discharge federal student loans except in very limited circumstances. This provision was added without any public debate or hearings, so consumers did not get any input or the ability to comment on this provision. The reasoning behind adding this secret provision was that debtors with student loans were abusing the bankruptcy laws, but the evidence to support this belief is nonexistent.


The bankruptcy laws in place today already have sufficient safeguards in place to prevent abuse during bankruptcy, and this has led the NACBA to ask the US Congress to address this problem and reinstate the ability by debtors to discharge federal student loan debt. The NACBA is also asking Congress to put back into place a statute of limitations concerning student loan debt that is reasonable, and that will terminate the rights of creditors after the specified period. This statute of limitations would prevent any lawsuit, judgment enforcement, garnishments, seizures, and other collection activities on any student debt past the statute of limitations put in place. According to the NACBA “Statutes of limitation apply to nearly all federal criminal actions. The rare exceptions exist for those crimes that are punishable by death, including espionage and treason, and now, student loan defaults.”


The facts clearly show that the current bankruptcy laws in place prevent fraud and abuse of this process, so there is no reason why student loan debt should not be discharged in many cases as well. The current Bankruptcy Code includes a Means Test, a mandatory clause that requires credit counseling to minimize the risk of future debt problems and bankruptcy filings, financial planning requirements, and even a fee that is more expensive. Many bankruptcy attorneys view student loan debt as the next ticking time bomb, similar to the mortgage and foreclosure crisis, and Ohio consumers with student loan debt are in a difficult situation unless the bankruptcy law is changed to include this student debt.


Some Surprising Statistics About Student Debt In The USA


The statistics concerning student debt are astonishing. 17% of parents of 2010 graduates borrowed money for their children, a significant increase from 1992-1993 when only 5.6% of parents borrowed educational funds for their children. In 2010 student loans totaled 100 billion dollars for this year alone. In 2011 the total amount of student loans owed was more than 1 trillion dollars. Today in the USA student loan debt is more than the credit card debt owed by US consumers. Of the 2005 graduates with student loan debt  25% had delinquent payments and 15% had defaulted on this debt. One missed payment is a delinquency; a nine-month delinquency is a default. The government student loan default rate is roughly 20%. Student loan debt increased by 47% among borrowers who were between the ages of 35 years old and 49 years old, and this increase is higher than any other age group.


A survey last year by NACBA received responses from 860 professional bankruptcy attorneys who handle consumer bankruptcies. The responses were shocking, and showed that:


ñ     95% of bankruptcy attorneys reported that very few undue hardship discharges of student loans will be granted to student loan debtors. This means little hope of any escape from student loan debt for almost all consumers.

ñ     82% of bankruptcy attorneys said that the inability to discharge student loans in bankruptcy prevents clients from getting a fresh start.

ñ     39% of bankruptcy attorneys have seen client cases with student loans increase, with many seeing an increase of as much as 25% to 50% just in the past 3-4 years.

ñ     81% of bankruptcy attorneys said that in the last 3-4  years a noticeable increase in bankruptcy clients with student loan debts have been seen. 40% have seen significantly increased cases with potential clients that have student loan debt.

ñ     One out of 4 consumer bankruptcy attorneys have seen an increase of between 50% and 100% in cases that include student loan debt.


The bankruptcy attorneys at Richard West Law can help provide a free debt consolidation consultation to help you find the right answer for your unique debt problems and circumstances, including any student loan debt you may have. Visit or call (513)771-8700 or (937)748-1749 to get the answers you want, and the financial relief you are looking for.

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