Though the general purpose of bankruptcy protection remains the same, lawmakers and others frequently look for ways to make the system work better for debtors and creditors. Disruptions caused by the COVID-19 pandemic and concerns about the treatment of student loan debt have set the stage for several potential changes to bankruptcy law.
With Americans owing nearly $2 trillion on their student loans, there has been a great deal of discussion regarding how this type of debt should be addressed. Under current law, it is difficult to discharge student loan debt through bankruptcy, as debtors must demonstrate “undue hardship” to obtain relief. Some lawmakers want to expand the reach of existing programs or pass legislation that makes it easier to ease the burden of education debt. Conversely, others believe that existing student loan forgiveness programs, such as the one designed for borrowers who take public service jobs, should be limited, or eliminated entirely.
Economic struggles caused by the COVID-19 pandemic prompted the federal government to raise the amount of debt someone could have while remaining eligible for Chapter 13 bankruptcy. Under the CARES Act, a filer could have up to $2.75 million each in secured and unsecured debt. With the expiration of that provision on June 21, 2024, pre-pandemic rules were reinstated, and now the maximum amounts are $465,275 for unsecured debt and $1,395,875 for secured debt. Given the number of filers while the CARES Act was in effect, there is discussion of raising the levels again.
Another potential change being discussed relates to the structure of Chapter 13 repayment plans. Currently, Chapter 13 allows debtors to create a repayment plan over a three to five-year period to pay off some or all of their debts. Shorter repayment periods could allow debtors to resolve their bankruptcy cases more quickly, but also would require higher monthly payments to creditors. Proposals to introduce greater flexibility in repayment terms could make it easier for individuals with fluctuating incomes to remain compliant with their plans, reducing the number of cases dismissed due to missed payments.
Keeping up with legal developments gives you the best chance to capitalize on changes that benefit you. A bankruptcy attorney at Jeff Field & Associates can review your situation and advise you on what solution best suits your needs. Our firm assists clients throughout Georgia from offices in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta and Scottdale. For a consultation, please call 404-381-1278 or contact us online.