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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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If a person who has private student loans declares bankruptcy,

Customer Question

If a person who has private student loans declares bankruptcy, how does it effect the cosigner of the private student loans under the Student Loan Bankruptcy Fairness Act (H.R. 5043) which went into effect September 2010?
Submitted: 6 years ago via ExpertLaw.
Category: Bankruptcy Law
Expert:  cfortunato replied 6 years ago.

Hi JACustomer,

H.R. 5043 has not yet been enacted. It is still in the House Judiciary Committee. The House Judiciary Subcommittee approved the bill in September 2010, which sent it to the full Committee, where it currently is.

However, if the bill is enacted, private student loans will be dischargeable along with other unsecured debt, and in the same manner, in Bankruptcies that are filed after the bill is enacted (if it is enacted - the bill is sitting in that committee with close to a thousand other bills waiting to be considered).

I think this is what you wanted to know. If not, please let me know.
Thank you!

Customer: replied 6 years ago.
My question refined: how bankruptcy effects cosigners of private student loans (A) under current law (B) if the Student Loan Bankruptcy Fairness Act (H.R. 5043) is passed into law?
Expert:  cfortunato replied 6 years ago.

A) With current law, if the primary borrower files a Bankruptcy, the co-signer remains responsible for paying the student loan, and if the co-signer files a Bankruptcy, the co-signer will still be liable for the loan, as filing a Bankruptcy currently has no affect on the liability for a student loan for the primary borrower or for the co-signer.

B) If H.R. 5043 is enacted, then if the primary borrower files a Bankruptcy, the primary borrower would no longer be responsible for the loan, but the cosigner would still be liable, unless the co-signer also files a Bankruptcy, in which case the co-signer would not be liable.

This may be a bit confusing. Please let me know if you need further clarification.

Thank you!

 



Edited by cfortunato on 1/7/2011 at 12:55 AM EST