New Student Loan Modification Program

For debtors in the Tampa Bay area who are considering Chapter 13 bankruptcy because they are having difficulty with student loan payments, it is important to know about a new program in the Middle District of Florida concerning student loan modification. According to a recent administration order, the United States Bankruptcy Court for the Middle District of Florida has prescribed a “district-wide program for debtors and their student loan lenders” who are seeking “repayment options through a student loan modification program,” or the “SLM Program.” What does that program look like? In short, it aims to facilitate communication between lenders and debtors so that both parties can reach an agreeable resolution with regard to student loan debt.

We want to tell you more about this program and how it may be able to benefit debtors in the Tampa Bay area. It takes effect on August 1, 2019.

Purpose of the SLM Program

The overarching purpose of the SLM Program is to create a “forum for debtors and lenders to discuss consensual repayment options for student loans.” What is involved in that forum? The administrative order lists the following as elements:

• Facilitating communication between the lender and the borrowing;
• Providing a venue in which the lender and borrower can “exchange information in an efficient and transparent manner”; and
• Encourage both the lender and borrower to “finalize a feasible and beneficial agreement under the administrative oversight of the United States Bankruptcy Court for the Middle District of Florida.”

In short, it is currently difficult for student loan lenders and borrowers to engage in these practices without an overarching program. Given that more than 44 million people in the U.S. currently owe student loans that total more than $1.5 trillion, the program may be able to help borrowers who are filing for bankruptcy due to the inability to repay student loans.

SLM Program is Designed for Debtors Who Have Filed for Bankruptcy

To be clear, the SLM Program is not for any debtors in Florida who are struggling to repay student loans. Rather, it is designed specifically for debtors who already have filed for personal bankruptcy and have student loan debt that they are seeking to discharge as part of the bankruptcy case. The administrative order clarifies that any debtor with an “eligible loan” and “a case pending before the United States Bankruptcy Court for the Middle District of Florida may participate in the SLM Program.”

An “eligible loan” is defined as “any educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit or made under any program funded in whole or in part by a governmental unit or any loan that purports to be a student loan.” In other words, debtors with both government and private student loans may be eligible for the SLM Program once they file for bankruptcy.

How the SLM Program Works

The first question you might have when you are wondering how the SLM Program works is this: How does a debtor enter into the SLM Program once it takes effect on August 1, 2019? The debtor can initiate the SLM program once she or he files for bankruptcy, but the creditor or Chapter 13 Trustee also is allowed to initiate the SLM Program once the debtor files for bankruptcy.

Then, the debtor and creditor can reach an agreement about the debtor’s student loan payments, including a decision for the debtor to enter into an income-driven repayment (IDR) plan or to modify an IDR plan. Whether the modification includes an IDR plan or not, any modification made through the SLM Program will need to be reflected in the debtor’s Chapter 13 repayment plan, and payments on student loans will need to be made through the Chapter 13 Trustee.

Contact a Tampa Bankruptcy Lawyer

If you have questions about filing for consumer bankruptcy or want to learn more about whether the SLM Program could benefit you, it is important to discuss your case with an experienced Tampa Chapter 13 bankruptcy attorney. An advocate at our firm is available to answer your questions. Contact Samantha L. Dammer for more information.