New Bankruptcy Program Helps Struggling Student Loan Borrowers Keep Their Professional Licenses and Receive Relief

The U.S. Bankruptcy Court for the Middle District of Florida announced in an administrative order issued on June 10, 2019, a program that will help borrowers who are struggling to pay their student loans receive relief as well as save their jobs and professional licenses. It is hard to believe that failure to pay student loan debt can cost you your job.  But in 13 states (including Florida), it is legal to revoke a professional license if the borrower defaults on their student loan debt. This order comes at a time when a growing number of Florida health care workers have had their professional licenses suspended.

Student loan debt is an issue that affects many of our clients. The U.S. Department of Education estimates that Americans are past due on more than $1.5 trillion in student loan debt. Floridians are feeling the pain even more, as the state ranks in the top 10 states with the most defaulted student loans.

Florida is one of a dozen of states with laws on the books that allow the state health departments to suspend medical licenses if a borrower defaults on his or her student loan obligations. Of the 13 states that have these laws, Florida seems to be one of the only states enforcing the law. Up until 2017, this law did not seem to create many waves. However, after July 2017, a notable shift happened in how it was enforced.

Between the years 2004 and 2016, only 31 medical licenses were suspended. However, since July 2017, that number has jumped to 128 licenses suspended. This figure is small in comparison to the number of licenses that were at risk of being suspended. The health department reported that more than 900 licensed healthcare professionals were at risk of losing their licenses.

Officials in the Bankruptcy Court for the Middle District of Florida hope to offer relief. The program, which goes into effect on August 1, 2019, creates a student loan modification system where borrowers and lenders can work out repayment options for student loans. The program is currently only available for loans made, insured or guaranteed by a governmental entity, which leaves out relief for private student loans. The program creates a secure online portal where the borrower and lender can exchange information and can track progress on the repayment plan. The portal is also accessible for Chapter 13 bankruptcy trustees, if the borrower has already filed for bankruptcy. The types of options available for the borrower include rehabilitation, consolidation, income driving repayment plans or debt settlement.

The new program allows the bankruptcy trustee to refer people to the program, as well as allows them access to see how repayment plans are going and to be a part of the process.

If you have private student loans and are concerned about what could happen to you if you are not able to repay these loans, do not lose hope. Prior to 2005, private student loans could be discharged in bankruptcy. However, there has been increased talk that we could be going back to how these loans were handled before 2005. A report by the American Bankruptcy Institute recommended that the law be changed to allow for the discharge of private student loans.

So many of our clients struggle with their monthly student loan payments. My law firm has successfully wiped out student loans in bankruptcy, but it wasn’t easy. Call me if you are having problems paying your debts. Having debt make you stay up at night. It stresses you out. It ruins relationships. I went through it. Boldly, I mustered up the courage to call a bankruptcy attorney and I pressed the restart button in 2008. And even though ten years has passed since I made that decision to reset my life, I never forgot what it did for me and how it helped me start over. It even inspired me and my law firm to become the largest filers of bankruptcies in the country and in the top two in Florida all from our offices in Orlando and Kissimmee. Remember, we are local in your hometown.

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