Democrats Push to Lift Ban on Student Loan Bankruptcy Relief

On the heels of U.S. President Joe Biden’s long-awaited student debt relief announcement, four congressional Democrats are pushing to overhaul the section of the bankruptcy code regarding private and federal educational loans.

“Americans across the nation are facing crushing student loan debt that is preventing them from purchasing homes and living the true American dream,” House Judiciary Committee Chair Jerry Nadler (D-N.Y.) said Thursday. “We must ensure that Americans are able to invest in their education and then go on to live quality lives without the cloud of rising debt hanging over their heads.”

“I am pleased to introduce the bipartisan Student Borrower Bankruptcy Relief Act of 2022, which is a positive step in that effort,” the congressman continued. “This legislation updates the federal bankruptcy code to ensure student loan debt is treated like almost every other form of consumer debt that can be discharged during bankruptcy.”

Nadler and Sen. Elizabeth Warren (D-Mass.), a former Harvard University professor and a nationally renowned expert in bankruptcy law, are leading the fight for that change. They are joined by a pair of Rhode Island Democrats: Sen. Sheldon Whitehouse and Rep. David Cicilline, chair of the judiciary panel’s Subcommittee on Antitrust, Commercial, and Administrative Law.

When the legislation—initially unveiled in 2020—was officially reintroduced last week, Warren said that it “takes long overdue steps to make it a little easier and a little less expensive for people who are in deep financial trouble to get meaningful bankruptcy relief.”

As CBS News detailed last week:

The Consumer Bankruptcy Reform Act of 2022 would create a new provision in the U.S. bankruptcy code—Chapter 10—under which student loans would be treated like credit cards, medical expenses, and other consumer debt. Borrowers could file for Chapter 10 and have their student loan balance canceled with approval from a bankruptcy judge.

Warren’s bill would also eliminate Chapter 13 bankruptcy, which allows people to pay off a portion of their personal debt over three to five years. In another important change, the bill would bar individuals from filing for Chapter 7—the provision companies often use to restructure their debts. Eliminating those two options in favor of a Chapter 10 filing would simplify the bankruptcy process, which is cumbersome and costly for most individuals, Warren’s office said.

While CBS noted that the legislation faces an uncertain future in Congress—the makeup of which will shift after next month’s midterm elections—a spokesperson for Warren highlighted that Biden “has already taken a historic step to reduce the crushing effects of student loan debt that can drive people to bankruptcy, and he endorsed the framework of this bill during his presidential campaign.”

Congressional Democrats’ renewed fight to reform bankruptcy law comes as the Biden administration sorts out the details of the president’s pledge to forgive up to $20,000 in student debt for certain federal borrowers—an effort that some Republican officials are trying to stop in court.

Originally published at Commondreams.org.