Section 1. Short title.
This Act may be cited as the “Student Loan Bankruptcy Reform Act of 2023”.
Section 2. Findings.
Congress finds the following:
(1) The cost of college has increased significantly in recent years, making it difficult for many students to afford a college education without taking out loans.
(2) Student loan debt is a major financial burden for many borrowers, and can lead to financial hardship, bankruptcy, and other negative consequences.
(3) The current bankruptcy law does not allow student loans to be discharged, even in cases of undue financial hardship or medical inability to continue work in the field.
(4) This lack of bankruptcy protection can trap borrowers in a cycle of debt, making it difficult to achieve financial security.
Section 3. Definitions.
In this Act:
(1) The term “intangible asset” means any asset that is not a physical asset.
(2) The term “undue financial hardship” means a situation in which the borrower’s income is insufficient to meet their basic living expenses and repay their student loans.
(3) The term “medical inability to continue work in the field” means a situation in which the borrower is unable to perform the essential functions of their job due to a medical condition.
Section 4. Discharge of student loans in bankruptcy.
(a) In general—Notwithstanding any other provision of law, a student loan may be discharged in bankruptcy if the borrower demonstrates that the loan would impose an undue financial hardship on the borrower and their dependents.
(b) Medical inability to continue work in the field—A student loan may be discharged in bankruptcy if the borrower demonstrates that they are unable to continue working in their field due to a medical condition.
(c) Legitimate repayment plan—A student loan may be discharged in bankruptcy if the borrower demonstrates that they had a legitimate repayment plan in place before taking out the loan.
Section 5. Effective date.
This Act shall take effect on the date that is 180 days after the date of its enactment.
This is just a sample example, and the specific requirements would likely vary depending on the specific circumstances.
More detailed explanation of the sample legislation:
·Section 1.
Short title: This section simply gives the legislation a name, which is
"Student Loan Bankruptcy Reform Act of 2023."
·Section 2. Findings: This section lists the reasons why Congress is considering this legislation. In this case, the reasons are that the cost of college has increased, student loan debt is a major financial burden, and the current bankruptcy law does not allow student loans to be discharged.
·Section 3. Definitions: This section defines some of the terms that are used in the legislation. In this case, the terms that are defined are "intangible asset," "undue financial hardship," and "medical inability to continue work in the field."
·Section 4. Discharge of student loans in bankruptcy: This section sets out the conditions under which student loans may be discharged in bankruptcy. In this case, a student loan may be discharged if the borrower demonstrates that the loan would impose an undue financial hardship on the borrower and their dependents, if the borrower is unable to continue working in their field due to a medical condition, or if the borrower had a legitimate repayment plan in place before taking out the loan.
·Section 5. Effective date: This section states that the legislation will take effect 180 days after it is enacted.
This is just a sample example, and the specific requirements would likely vary depending on the specific circumstances. For example, the definition of "undue financial hardship" could be more specific, and the criteria for determining whether or not a borrower is unable to continue working in their field due to a medical condition could be more stringent.
It is important to note that this legislation is not a guarantee that student loans will be discharged in bankruptcy. The borrower would still have to meet the criteria set out in the legislation. However, this legislation would make it easier for borrowers to discharge their student loans in bankruptcy.
v2 Further elaboration on the sample legislation:
Section 1. Short title: This section simply gives the legislation a name.
Section 2. Findings: This section provides Congress's rationale for passing the legislation.
Section 3. Definitions: This section defines the terms that are used in the legislation.
Section 4. Discharge of student loans in bankruptcy: This section sets out the conditions under which student loans may be discharged in bankruptcy.
Section 5. Effective date: This section specifies when the legislation will take effect.
The legislation would require borrowers to demonstrate that they meet all of the following criteria in order to have their student loans discharged in bankruptcy:
The loan would impose an undue financial hardship on the borrower and their dependents.
The borrower is unable to continue working in their field due to a medical condition.
The borrower had a legitimate repayment plan in place before taking out the loan.
The legislation would also require borrowers to provide documentation to support their claims. This documentation could include tax returns, pay stubs, medical records, and other evidence.
The legislation would be a significant change to the current bankruptcy law, which does not allow student loans to be discharged. The legislation would provide much-needed relief to borrowers who are struggling to repay their student loans.
Here are some additional thoughts on the matter:
The legislation would likely have a significant impact on the student loan market. Lenders would likely be less willing to make loans to students if they knew that the loans could be discharged in bankruptcy.
The legislation would also likely have a significant impact on the cost of college. Colleges would likely have to raise tuition in order to make up for the lost revenue from student loans.
The legislation is a complex issue with no easy answers. It is important to weigh the pros and cons of the legislation carefully before making a decision.
v3 Further elaboration on the sample legislation:
Section 1. Short title: This section simply gives the legislation a name.
Section 2. Findings: This section states the reasons why the legislation is being proposed. In this case, the reasons are that the cost of college has increased significantly, student loan debt is a major financial burden for many borrowers, and the current bankruptcy law does not allow student loans to be discharged, even in cases of undue financial hardship or medical inability to continue work in the field.
Section 3. Definitions: This section defines the terms used in the legislation. In this case, the terms defined are "intangible asset," "undue financial hardship," and "medical inability to continue work in the field."
Section 4. Discharge of student loans in bankruptcy: This section sets forth the criteria that must be met in order for a student loan to be discharged in bankruptcy. The criteria are:
The borrower must demonstrate that the loan would impose an undue financial hardship on the borrower and their dependents.
The borrower must demonstrate that they are unable to continue working in their field due to a medical condition.
The borrower must demonstrate that they had a legitimate repayment plan in place before taking out the loan.
Section 5. Effective date: This section states when the legislation will take effect. In this case, the legislation will take effect 180 days after the date it is enacted.
It is important to note that this is just a sample example, and the specific requirements would likely vary depending on the specific circumstances. The legislation could be modified to include additional criteria, or to change the criteria that are already in place. For example, the legislation could be modified to include a requirement that the borrower has made a good faith effort to repay the loan before filing for bankruptcy.
The legislation could also be modified to provide for different levels of bankruptcy protection for different types of student loans. For example, the legislation could provide for full bankruptcy protection for federal student loans, but only partial bankruptcy protection for private student loans.
The specific requirements of the legislation would need to be carefully considered in order to strike a balance between protecting borrowers from undue financial hardship and ensuring that lenders are able to recoup their investment.
Travis Stone & Bard
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