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NACBA Response by President Ed Boltz to U.S. News Article “Debunking the Student Loan Bankruptcy Myth”
To the Editor:
More proof that if it sounds too good to be true, it usually is: Contrary to what you may read, 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.
Edward Boltz
President, National Association of Consumer Bankruptcy Attorneys
Raleigh, North Carolina
Dear NACBA Member:
As you know, the mission statement of NACBA is to serve the needs of consumer bankruptcy attorneys and protect the rights of consumer debtors in bankruptcy. It is also the responsibility of the organization to weigh-in on policy matters where the playing field may not be level in the area of bankruptcy law.
Over the past few days, the volunteer members of the NACBA Legislative Committee received notice that their efforts are gaining momentum in Washington D.C.
Three members of the United States Senate, Dick Durbin (D-IL), Jack Reed (D-RI) and Elizabeth Warren (D-MA), and four members of the United States House of Representatives, John Conyers (D-MI), Elijah Cummings (D-MD), Steve Cohen (D-TN) and Hank Johnson (D-GA), joined together to urge the Secretary of Education, Arne Duncan, to bring more fairness to struggling students by establishing clear standards of eligibility for “undue hardship” discharge of federal student loans in bankruptcy.
The action taken by the listed elected officials was inspired by a NACBA Legislative strategy dating back to 2012. For the past two years, NACBA members (and strategic partner organizations) have met with members of the United States House and Senate and urged their assistance for Administrative Action on the growing $1.2 trillion student loan debt. Not only did NACBA members voice concern on Department of Education practices but also suggested solutions that would not require legislative action. It was noted that the Department of Education should create “clear standards” for borrowers to qualify for discharging their student-loan debt.
During a time when Washington D.C. displays nothing but gridlock and partisanship, the voices of NACBA Members have not fallen on deaf ears. We will be closely following any response and keep you apprised.
NACBA works daily on state and national issues that impact bankruptcy law and will continue to do so. As a member of NACBA, you are providing much needed support for our work and help ensure the every segment of the population can participate in the bankruptcy system should their finances come under strain by layoffs, accidents, or other unforeseen life events, they will be protected.
Thank you for your continued membership.
NACBA Now 