BILL ANALYSIS Ó
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THIRD READING
Bill No: AJR 11
Author: Wieckowski (D), et al.
Amended: 5/13/13 in Assembly
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-1, 6/18/13
AYES: Evans, Corbett, Jackson, Leno, Monning
NOES: Walters
NO VOTE RECORDED: Anderson
ASSEMBLY FLOOR : 46-19, 5/16/13 - See last page for vote
SUBJECT : Bankruptcy
SOURCE : Author
DIGEST : This resolution urges the Congress and the President
of the United States to support and pass legislation that allows
private student loan debt to be dischargeable in a bankruptcy
case filed under Chapter 7 or Chapter 13 of the Bankruptcy Code
(BRC).
ANALYSIS : Existing federal law exempts from discharge in a
bankruptcy case filed under Chapter 7 or Chapter 13 of the BRC
specified educational loans made, or secured, by a lender other
than the federal government, also known as private student
loans, unless the debtor convinces a bankruptcy court that
repayment would be an undue hardship on the debtor and the
debtor's dependents, a sometimes difficult and expensive process
not required to discharge other unsecured nonpriority debt.
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This resolution makes the following legislative findings:
1. This resolution shall be known as the Financial Fresh Start
Resolution of 2013.
2. Existing federal law exempts from discharge in a bankruptcy
case filed under Chapter 7 or Chapter 13 of the BRC specified
educational loans made, or secured, by a lender other than
the federal government, also known as private student loans,
unless the debtor convinces a bankruptcy court that repayment
would be an undue hardship on the debtor and the debtor's
dependents, a sometimes difficult and expensive process not
required to discharge other unsecured nonpriority debt.
3. Californians should have the same ability to discharge their
private student loan debt as they do to discharge their
unsecured nonpriority debt.
4. U.S. Senator Dick Durban and Representative Steve Cohen have
recently introduced the following legislation in their
respective congressional houses that would permit private
student loan debt to be discharged in bankruptcy and are
substantially similar to legislation they each introduced in
2010 and 2011:
A. The Fairness for Struggling Students Act of 2013.
B. The Private Student Loan Bankruptcy Fairness Act of
2013.
This resolution urges the President and the Congress of the U.S.
to support and pass legislation that allows private student loan
debt to be dischargeable in a bankruptcy case filed under
Chapter 7 or Chapter 13 of the BRC similar to the
dischargeability of unsecured nonpriority debt.
Background
Bankruptcy is a judicial process through which a consumer or
business (debtor) can eliminate or repay some or all of debt
owed to a creditor. The most commonly used bankruptcy
proceedings are Chapter 7 and Chapter 13 under the BRC. Chapter
7 provides for the liquidation of the debtor's property to pay
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back some of the debt and allows the debtor to keep some of
his/her property as an exemption from the bankruptcy estate.
Chapter 13 allows the debtor to keep all of his/her property but
monthly payments are established to repay the debt.
In the bankruptcy proceeding, the debt is characterized as
secured (money was given to the debtor based on the debtor's
ownership of property or an asset that operates as collateral
for the money given) or unsecured (no property or asset was used
as collateral to secure the money given to the debtor). Common
types of secured debts include mortgages and automobile loans.
On the other hand, unsecured debt is further characterized as
priority or nonpriority debt. Priority debts rise to the top of
the list of debts owed by the debtor and will be paid first
during Chapter 7 liquidation, and priority debts must be paid in
full during Chapter 13 bankruptcy. Priority debts include wages
owed by an employer to employees, alimony and child support, and
death or personal injury claims caused by intoxication.
Nonpriority debts include credit card debt, medical and utility
bills, personal loans, and student loans. The court may
authorize the elimination (discharge) of some of the debt, which
could include credit card, car loan, and gambling debt.
However, student loan debt is rarely dischargeable.
Related Legislation
AB 233 (Wieckowski) prohibits issuance of a wage garnishment
order to collect on a private student loan debt judgment.
AJR 20 (Perez) requests that the Congress and the President of
the U.S. enact legislation to maintain the interest rate of 3.4%
for Federal Direct Stafford Loans.
FISCAL EFFECT : Fiscal Com.: No
SUPPORT : (Verified 6/19/13)
Associated Students of the University of California, Davis
California Council on Economic Education
California State Student Association
Children's Advocacy Institute at the University of San Diego
School of Law
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Latino Democratic Club
Veterans Caucus of the California Democratic Party
ASSEMBLY FLOOR : 46-19, 5/16/13
AYES: Alejo, Ammiano, Atkins, Bloom, Blumenfield, Bocanegra,
Bonilla, Bonta, Bradford, Brown, Ian Calderon, Campos, Chau,
Chesbro, Cooley, Daly, Dickinson, Eggman, Fong, Fox, Gomez,
Gordon, Gray, Hall, Roger Hernández, Jones-Sawyer, Levine,
Linder, Lowenthal, Medina, Mitchell, Mullin, Muratsuchi,
Nazarian, Pan, Perea, V. Manuel Pérez, Quirk-Silva, Rendon,
Salas, Skinner, Ting, Weber, Wieckowski, Yamada, John A. Pérez
NOES: Achadjian, Bigelow, Chávez, Conway, Dahle, Donnelly,
Gatto, Hagman, Harkey, Jones, Logue, Maienschein, Mansoor,
Nestande, Olsen, Patterson, Wagner, Waldron, Wilk
NO VOTE RECORDED: Allen, Buchanan, Frazier, Beth Gaines,
Garcia, Gorell, Grove, Holden, Melendez, Morrell, Quirk,
Stone, Torres, Williams, Vacancy
AL:k 6/19/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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