Rob Lieber of The New York Times discusses a bill that aims to ease debts for private student loans if graduates file for bankruptcy. Ever since the bankruptcy law was rewritten in 2005, it included private and federal student loans, along with child support payments, criminal fines and overdue taxes, to its exemptions for discharge.

Senator Dick Durbin (D-IL) and U.S. Representative Steve Cohen (D-TN), along with other members in Congress, first introduced  this legislation in June 2007 in order revert to the 1978 bankruptcy law where only federal student loans were exempted from discharge.

Senator Durbin said that this bill would take "an additional step toward restoring fairness in student lending, by placing student loan companies in the same position as virtually all other private lenders." With Lieber's article mentioning how one can erase loans from a new home theater system or even a casino, Durbin aims for Congress to recognize that private student loans should at least be on the same page as these dischargeable loans. "Private education debt is no different than other consumer debt," said Representative Danny Davis (D-IL). "It involves private profit and deserves no privileged treatment."

The New York Times article also raises arguments against those who question this change in legislature. John Hupalo, managing director of student loans at Samuel A Ramirez and Company, asked, "With no assets to lose, an education in hand, why not discharge the loan without ever making a payment to the lender?" Lieber writes that filing for bankruptcy is not as easy as this question implies. With it damaging one's credit report, bankruptcies are usually a last alternative rather than an advantage to simply walk away.

Lieber also quotes Andy Winchell, a N.J. bankruptcy lawyer, stating a graduate's difficulty of simply "shirking your obligations." "It's not easy to find a dishonest bankruptcy attorney who is going to risk their license to practice law on a case they don't believe in," he said. The article also states that there is no strong evidence indication a rise in bankruptcies if private student loans were dischargeable.

 *Any information on all blog entries should not be construed as legal advice. If you have any legal issues, please consult an attorney.