CFPB Scrutinizes Collection Actions On Student Loans Discharged In Bankruptcy

When any debt is discharged in a personal bankruptcy case — including student loan debt — a creditor or lender or debt collector cannot continue to take steps to try to collect that debt. To be clear, once the debt has been discharged through a Chapter 7 or Chapter 13 bankruptcy case, the debtor is no longer liable for the debt. However, according to a recent news release from the Consumer Financial Protection Bureau (CFPB), examiners from the CFPB have determined that loan servicers have engaged in “unfair practices in trying to collect on loans discharged in bankruptcy.” Indeed, servicers have collected money on discharged student loan debt from consumers, and the CFPB has indicated that servicers will be held accountable for actions they have taken that have violated orders from bankruptcy courts. What do you need to know? Our bankruptcy lawyers in West Palm Beach can tell you more about the recent news release from the CFPB and more about discharging student loans in bankruptcy.

Unfair Practices Concerning Debt Collection on Discharged Student Loan Debt 

When CFPB examiners determined that student loan servicers had unlawfully made attempts to collect on student loan debts discharged in bankruptcy, and had actually collected unlawfully on student loan debts discharged in bankruptcy, the CFPB made clear those loan servicers would be directed “to return illegally collected payments to affected consumers and immediately cease these unlawful collection tactics.”

Rohit Chopra, the current director of the CFOB, made clear that, “when a court orders the discharge of a loan, lenders and servicers should not treat this as a suggestion.” Chopra went on to clarify that the CFPB “found that some servicers are ignoring bankruptcy court orders” and thus are out of compliance with the law. Not only has the CFPB determined that some servicers were collecting on student loans discharged in bankruptcy, but it also has found in the past that “student loan servicers deceptively told borrowers that their loans were not dischargeable in bankruptcy even though the Bankruptcy Code does allow for discharge.”

The CFPB will be ordering student loan servicers to identify debtors whose loans were discharged and to refund payments made on discharged student loans. If you were affected, you should talk with an attorney. You should also get in touch with a lawyer if you have student loan debt and are considering bankruptcy. You could be eligible to have your student loan debt discharged in a personal bankruptcy case.

Contact a West Palm Beach Bankruptcy Attorney 

Many debtors in South Florida have student loan debt, and they should be considering their options for bankruptcy. As you may know, there are new guidelines concerning student loan debt and bankruptcy discharges that will make the process of having student loan debt discharged in bankruptcy easier. To determine if you are eligible to have your student loans discharged in bankruptcy, it is important to speak with an experienced West Palm Beach bankruptcy attorney at Kelley Kaplan & Eller about your situation as soon as you can. While you might have previously thought it would be impossible to have your student loan debt discharged, the process may be significantly easier than you would think. Do not hesitate to get in touch with us to find out more about your options.

Source:

consumerfinance.gov/about-us/newsroom/cfpb-heightens-scrutiny-of-unlawful-collection-of-payments-on-discharged-student-loans/