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As Americans struggle to pay off underwater mortgages and student loan debt, some experts say simple changes to bankruptcy law could provide many with financial relief and potentially help the economy.
These experts say Congress should amend the Bankruptcy Code to allow people burdened by underwater mortgages and student loans to discharge their debts in bankruptcy, which is extremely difficult to do under the current law.
“I emphatically believe that the bankruptcy system is the best place to sort out the current consumer debt mess,” says Jason Kilborn, scholar in residence at American Bankruptcy Institute.
The pool of potential beneficiaries could be substantial.
Almost 11 million homeowners are currently underwater on their mortgages, and outstanding student loan debt is approaching $1 trillion, with delinquencies continuing to rise.
Kilborn believes the amendments could help put more money in consumers’ pockets.
Chris Christopher, a senior principal economist at IHS Global Insight, says it would be “a very positive development” since consumer spending represents more than 70 percent of the U.S. economy.
Dean Baker, co-director of the Center for Economic and Policy Research, agrees and says: “People can overplay the importance of debt relief, but it would certainly help if people could get out from under their burdens.”
As Americans struggle to pay off underwater mortgages and student loan debt, some experts say simple changes to bankruptcy law could provide many with financial relief and potentially help the economy.
These experts say Congress should amend the Bankruptcy Code to allow people burdened by underwater mortgages and student loans to discharge their debts in bankruptcy, which is extremely difficult to do under the current law.
“I emphatically believe that the bankruptcy system is the best place to sort out the current consumer debt mess,” says Jason Kilborn, scholar in residence at American Bankruptcy Institute.
The pool of potential beneficiaries could be substantial.
Almost 11 million homeowners are currently underwater on their mortgages, and outstanding student loan debt is approaching $1 trillion, with delinquencies continuing to rise.
Kilborn believes the amendments could help put more money in consumers’ pockets.
Chris Christopher, a senior principal economist at IHS Global Insight, says it would be “a very positive development” since consumer spending represents more than 70 percent of the U.S. economy.
Dean Baker, co-director of the Center for Economic and Policy Research, agrees and says: “People can overplay the importance of debt relief, but it would certainly help if people could get out from under their burdens.”
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