National Association of Chapter 13 Trustees Supports Changes to Existing Bankruptcy Code to Address Student Loan Crisis | Company

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COLUMBIA, SC–(BUSINESS WIRE)–Sept. 28, 2022–

The National Association of Chapter 13 Administrators (NACTT) supports amending two statutes in the current Bankruptcy Code and amending the Department of Education’s definition of “undue hardship” to address the student loan crisis.

Instead of revamping the entire bankruptcy code as currently proposed, NACTT recommends removing the impediment to paying student loan interest in bankruptcy under 11 USC §1322, by amending the wording of undue hardship in 11 USC §523(a)(8) to include a time requirement again, and requiring the U.S. Department of Education to amend the definition of “undue hardship.”

Bankruptcy has helped more than 15.3 million Americans since 2005, including five million Chapter 13 filings. help more people get a fresh start by modifying and resolving their Chapter 13 student loans like others with unpaid tax debt or federal obligations.

Bankruptcy under Chapter 13 allows individuals to pay off their disposable income over a period of three to five years, giving them the opportunity to restructure debts, fix mortgage arrears, pay off automobiles and pay off property real estate and overdue income taxes, while paying only the minimum amount required. on medical bills and credit cards (from 0% to 100%). All of this allows a debtor to get a fresh start.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 amended the bankruptcy code so that those who file Chapter 13 can no longer obtain student loan debt relief, resolve defaults or pay the full amount due within three to five years. In most cases, debtors simply do not have enough income to repay student loan debt. This lack of relief also applies to grandparents or parents who had to co-sign or take out parent plus loans.

The Higher Education Act and the Bankruptcy Abuse Prevention and Consumer Protection Act 2005 have limited the ability to heal, repay or forgive student loans. Prior to this law, student loans could be paid, modified or canceled under Chapter 13 provided that: (i) the person had taken out the loan more than seven years before the bankruptcy or (ii) could prove that payment of the debt would create an undue hardship for the individual or his successors. After the changes, bankrupts had to prove undue hardship to pay the student loan and could not pay more to a student loan than to other general unsecured creditors under §1322(a)(10) through unless paying all other general unsecured creditors in full.

About the NACTT

Founded in 1965, the National Association of Chapter 13 Trustees is an association of more than 1,000 trustees, lawyers, chartered accountants and others interested in insolvency matters. The association is dedicated to the highest standards of education related to Chapter 13 bankruptcy. For more information, visit http://www.nact.com.

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CONTACT: Beth Hawks

CoreComm PR

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SOURCE: National Association of Chapter 13 Administrators (NACTT)

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PUB: 09/28/2022 10:00 a.m. / DISC: 09/28/2022 10:03 a.m.

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