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Tennessee Rep. seeks changes to bankruptcy laws and student loans

Most people do everything they can to better their future. One way that many young people try to do this is by going to college. This education is supposed to give people the competitive edge they need to land a stable and well-paying job in the future. However, this isn't the reality for many graduates.

Instead of economic security many recent graduates struggle to find jobs. The jobs they do find pay less than they expected. On top of this, graduates find that they are left with enormous student loan debt. In fact, the average Tennessee graduate will walk away from college with at least $25,000 in student loan debt.

Unlike many other types of debt, student loan debt is not easily discharged in bankruptcy. The bankruptcy code prohibits discharging public or private student loan debt without showing an undue hardship. In the past this standard has been difficult to define and unevenly applied.

Now, one U.S. Representative wants to change this. U.S. Representative Steve Cohen from Tennessee is working with other congress members to push the Secretary of Education into adopting clearer standards for the undue hardship requirement. By creating these standards, these congress members hope that the bankruptcy code will be applied more evenly to people that need financial help. Cohen argues that it is a waste of resources to have to litigate so many bankruptcy cases to determine if an undue hardship exists.

Additionally, Cohen has sponsored a bill which would change how private student loans are handled in bankruptcy court. Under this bill, private student loans would not need to meet the undue hardship standard, but would be treated like other personal debt.

People who are struggling with student loan debt may eagerly await the outcome of this potential legislation. However, they should know that Chapter 7 bankruptcy can still provide valuable debt relief in many cases. When struggling with any type of debt people should explore all their legal options.

Source: Daily News, "Cohen Pushes for Student Loan Bankruptcy Protection," Sam Stockard, Jan. 31, 2015

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