However, a distinct phenomenon occurred during the 1970s. Then, a significant number of students took out education loans and graduated as a result. However, upon completion of their studies and prior to obtaining employment, the students would petition for bankruptcy. The objective was to escape the obligation to repay the loan.
As unemployed, they could thus assert to the court that they had no income in their bankruptcy plea. In 1998, the government altered the law and the requirements in order to rectify this deficiency and in response to intense pressure. In 2005, additional alterations were made, and private loans were also introduced within the legal framework.
Effectively, the changes have made it more difficult to discharge student loans through a straightforward bankruptcy claim. Currently, the only condition that can lead to the discharge of a student loan is if the student can demonstrate that repaying the loan would cause him or his family undue hardship. This is the student's responsibility to demonstrate. Prior to 1998, student loans could be discharged if they were paid for seven years. However, this has changed.
Student loans are subject to the same laws governing contracts as any other loan contract because they are contracts.Thus, fraud, misrepresentation, etc. are susceptible to legal challenge. Another point in favor of students is that their loans are not collectible if the school has closed before they have completed their education. In a Chapter 13 proceeding, these challenges could be raised and decided by the bankruptcy judge.
According to these new regulations, a student loan can only be discharged if the bankruptcy court is persuaded that repaying the loan would cause him or his dependents undue hardship. The Federal Student Aid Ombudsman (FSAO) has therefore intervened and established three acknowledged criteria for determining whether a student loan can be discharged or not. They merit a review:
a) Initially, the student must demonstrate that he will not be able to maintain a minimal standard of living for himself and his dependents if he is forced to repay his student loan.
b) The second criterion is that he will struggle to maintain his finances if he pays the loan for an extended period of time.
c) The final criterion is that a student must have attempted to repay the loan prior to declaring bankruptcy. Generally, the student's endeavors to repay would be considered if payments have been made for at least five years.
If you do not satisfy these requirements, filing for bankruptcy is a waste of time because the courts will dismiss your case.Thus, the Bankruptcy Act is tightened, possibly to instill a sense of responsibility in the student population after they have graduated and begun working.
" - https://www.affordablecebu.com/
