NEW STUDENT LOAN PROGRAM
Ability to Participate in a Student Loan Program under Pa Local Bankruptcy Rules
STUDENT LOAN DISCHARGEABILITYStudent loans are generally not discharged in bankruptcy. Historically there have been few challenges by debtors seeking discharge in bankruptcy. The current law had followed the FAISCH test which created a three prong approach. The first prong is an analysis of the payment history and whether or not there was an evident good faith effort to repay. The second prong is whether or not your current budget shows that you do not have the ability to repay. The third prong is the likelihood in the future that you will have the ability to repay. This last prong is usually the problem. Some recent case law from Judge Frank seemed to limit that time frame of looking into the future which was a beneficial decision for debtors seeking discharge of student loans.
HISTORY-THE GOOD OLD DAYSWhen I started practicing in the 1980's student loans were dischargeable. The formula was simple, Student loans were dischargeable if it had been over seven years from they first became due excluding periods of deferment. The only defense used was agencies such as PHEAA would look at your budget to try to show that there was more disposable income o that the plan would need vto be increased. Those efforts rarely resulted in plan changes and was relatively quickly abandoned by the student loan agencies. i
NEW PROGRAMIt will be interesting how effective this program will be in helping with student loan debt and managing these type debts. It is obviously a large concern today with the inability to repay student loans and the hardship they impose upon young persons in particular and their parents. All student loan indebted persons are watching intently what the president may or may not do for student loan forgiveness in the coming months.