Effective Oct. 1, 2019, the U.S. Bankruptcy Court for the Middle District of Florida has started its student loan management program (SLM). The program is the result of the work of debtors’ attorneys and the Department of Justice to create a forum for debtors and lenders to discuss consensual repayment options for student loans within bankruptcy cases and is primarily aimed at chapter 13 debtors, although it is available to individual or joint debtors filing under chapters 7, 11, 12 and 13.
The program uses a secure online portal for debtors to provide student loan creditors with necessary documents for them to cure defaults and seek income-driven repayment plans, rehabilitation, consolidation and settlement. The program allows parties 180 days, unless otherwise agreed, to conclude the procedures and come to a resolution.
Debtors will submit an initial SLM package, and creditors must promptly advise of missing documentation. Creditors must then determine a debtor’s eligibility for a student loan repayment option within 60 days of receipt of the initial SLM package or the receipt of additional or corrective documentation.
The principles of the program, and the use of the portal, closely follow the mortgage modification mediation program pioneered by the Middle District of Florida that has been adopted in a number of other courts. Mediation occurs as part of the program, giving debtors a heretofore unheard of opportunity to have their questions answered and their loans discussed by an authorized representative and be advised of reasoning for a lack of resolution and to receive advice on the steps necessary to obtain available relief.
The Middle District of Florida also allows for income-driven student loan payments to be separately classified under nonstandard chapter 13 plan provisions and authorizes already confirmed chapter 13 debtors to seek modification of their plans to take advantage of the ability to separately classify and pay income-driven repayments during bankruptcy. Income-driven student loan repayment plans, for certain types of student loans, can result in debt forgiveness after 120 qualifying payments. It also prevents debtors from emerging from chapters 13 and 11 with larger student loan balances and no qualifying payments made toward debt forgiveness — as commonly occurs today.
Debtors’ attorneys are entitled to fees of $1,500, in addition to the no-look fee, for the representation of debtors seeking relief through the SLM program.
The program will increase communication between debtors and lenders, help end bankruptcy forbearance of student loans resulting in increasing student loan balances during chapter 13, and give debtors access to and knowledge of more options regarding their student loans than they may be aware of. It also assists debtors’ attorneys in giving their clients relief and guidance as to student loans in bankruptcy. As debtors’ attorneys are well aware, student loans are a difficult issue in many bankruptcy cases, as debtors are often in default, do not understand how to cure the default, and are therefore unable to qualify for income-driven repayment plans.
Attorneys who have worked on the SLM program, such as Robert B. Branson and Christie Arkovich, also wish to help expand the program if it proves successful. Even without formal procedures in your district, it may be possible to consider using the program through special motion wherever you practice as occurred in the early days of mortgage modification mediation programs. The Default Mitigation Management Portal will be establishing systems for the SLM program and will serve as the primary secure portal to be used by debtors and lenders.
The Consumer Bankruptcy Committee will be hosting a lunchtime webinar on Dec. 12, 2019, at 1:00 p.m. regarding the SLM program. Panelists include the debtors’ attorneys who helped make it possible, in addition to a representative from the DMM Portal. It will also provide additional information about this program to Consumer Bankruptcy Committee members and help you find out how to use this important program by bringing it to your own district or attempting to perform SLM through motion practice, as well as answer questions you may have about the program.