Stopping Abusive Student Loan Collection Practices in Bankruptcy Act of 2023 This bill requires a bankruptcy court to grant a debtor attorney's fees and the costs of the proceeding if (1) the debtor's student loan debt is discharged on the basis of undue hardship, and (2) the court finds that the creditor's position was not substantially justified.
If enacted, HB 306 could significantly alter the landscape of student loan debt management in bankruptcy proceedings. Currently, many debtors struggle to effectively navigate the complexities of bankruptcy law, especially concerning the discharge of student loan debts. This bill addresses a glaring gap in existing protections, aiming to ensure that individuals seeking relief from overwhelming student loans are not hindered by additional costs, such as attorney fees that may arise during the process of securing a discharge based on undue hardship.
House Bill 306, known as the 'Stopping Abusive Student Loan Collection Practices in Bankruptcy Act of 2023', seeks to amend Title 11 of the United States Code to provide greater protections for debtors with student loan debts in bankruptcy cases. The bill explicitly requires bankruptcy courts to grant attorney's fees and related costs to debtors when their student loan debt is discharged on grounds of undue hardship and the creditor’s position is deemed not substantially justified. This amendment aims to ease the burdens on individuals facing severe financial distress related to education-related debts.
Notable points of contention surrounding HB 306 include the potential financial impact on creditors and the student loan servicing industry. Opponents of the bill may argue that it could encourage more individuals to file for bankruptcy on their student loans, potentially leading to a higher rate of defaults. Furthermore, there may be concerns regarding the implications of labeling creditor claims as 'not substantially justified', which could affect lending practices and may lead to cautiousness from lenders when issuing student loans. Advocates, however, emphasize the necessity of ensuring that debtors are treated fairly within the bankruptcy system, particularly given the unique challenges posed by student debt.