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- Title
Bankruptcy's Thalidomide: Repurposing a Defunct Family Law Doctrine to Address Student Loans in Bankruptcy.
- Authors
Sloan, Weldon
- Abstract
The American bankruptcy system needs a thalidomide-a creative and innovative solution to a nationwide crisis brought on by the widespread proliferation of student loan debt. This crisis has only been exacerbated by the inability Of the current consumer bankruptcy regime to deal with what is increasingly becoming a larger and larger share of consumer debt. Partisan proposals have stagnated; a middle-way solution that stands a real chance of passing is desperately needed. This Note proposes just such a solution-an amendment to the Bankruptcy Code replacing the currently inadequate undue hardship standard with a standardfor discharge based on the actual value added of higher education. This proposed rule, based on a defunct family law doctrine, looks to determine whether a debtor has achieved an enhanced earning capacity" as a result of the education purchased with the loan. Creditors are only paid when they can show that their student loan actually increased the earning capacity of a debtor: otherwise, the loan will be automatically discharged. This results in a system which aligns the interests of debtors and creditors-creditors get paid back only when debtors are successful. The proposed rule harnesses this interest alignment and uses it to ensure that creditors have every incentive to help debtors succeed, providing debtors not only with a greater chance of discharge but also with a greater chance to avoid bankruptcy altogether. Just as thalidomide, a once-failed drug, has been repurposed to treat modern illnesses, so too can enhanced earning capacity be revived from family law's history books to solve the modern student loan crisis.
- Subjects
PERSONAL bankruptcy; STUDENT loan debt; HARDSHIP; HIGHER education; DEBTOR &; creditor
- Publication
Texas Law Review, 2022, Vol 100, Issue 5, p999
- ISSN
0040-4411
- Publication type
Article