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Bankruptcy May Be Your Option

Government tries to stop creditor harassment from its collectors

Efforts by the federal government to stop creditor harassment that violated consumer protection laws ended in a government victory when a judge dismissed a lawsuit by debt collectors seeking to be allowed to continue working on behalf of the government that fired them. The companies had been working for the U.S. Education Department under contracts to collect student loans on which borrowers had defaulted.

American consumers owe the government at least $100 billion in student loans on which they have defaulted. Facing financial challenges and in need of debt relief, consumers were instead subjected to debt collection tactics that included making statements designed to mislead consumers. The four companies sued the Education Department after their contracts were not renewed.

It is difficult for former students to obtain debt relief when student loans are combined with the credit card debt and other forms of consumer debt that most people have accumulated. Unlike most other forms of debt, student loans cannot readily be discharged in bankruptcy. This can make it difficult to negotiate with creditors to reduce interest payments or obtain other forms of debt relief.

A bankruptcy attorney might be of assistance to someone seeking manageable payments and a fresh financial start. A Chapter 13 bankruptcy may not allow for the discharge of student loan debt, but it may help to reduce a person’s overall debt to make the student loan payments more manageable. An attorney can review an individual debtor’s financial situation and discuss available options for achieving debt relief.

Source: Huffington Post, "Debt Collectors Lose Lawsuits Against Education Department," Shahien Nasiripour, April 14, 2015

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