Wiping out student loan debt in bankruptcy is so difficult it’s rarely an option for distressed borrowers. But there are indications that bankruptcy courts are starting to play a bigger role in addressing what is widely considered a financial crisis and a drag on the U.S. economy, according to a BloombergBNA analysis. While not aiming to discharge debt, about two dozen bankruptcy jurisdictions allow debtors to participate in programs that cap repayments based on income. And attorneys are having anecdotal success in negotiating with the government to get more debtors into these repayment plans even when they are in bankruptcy. Edward C. Boltz, a consumer advocate and partner with Law Offices of John T. Orcutt, P.C., Durham, N.C., said that judges and trustees are becoming more engaged in the process and “bankruptcy must be part of the solution.” Judge John E. Waites of the U.S. Bankruptcy Court for the District of South Carolina told Bloomberg BNA July 11 that he sees it as his “mission” to educate consumer attorneys and trustees in cases before him that involve student debt. He likens the problem to the subprime mortgage crisis at the center of the 2008-09 financial meltdown and believes government will wind up having to “fix it.” Read more.
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