Can Mortgage Forbearance Hurt Your Credit?

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Can Mortgage Forbearance Hurt Your Credit? and why

As we all know, the world is currently experiencing a financial downturn due to the ongoing pandemic, which has directly affected millions of jobs. As such, a lot of homeowners are bothered concerning their mortgage payments.

There have been some incentives by mortgage providers to soften the impact of payments for a period of time. This indeed was created by the Government to enable mortgage forbearance. So what then is mortgage forbearance?

What is Mortgage Forbearance?

Basically, forbearance is when a mortgage lender grants you some time or lets you pay up your mortgage at a lower rate. This method isn’t meant to scrap your payments as you would definitely be paying the reduced or paused payment back.

A lot of times, people mistake forbearance as a form of forgiveness, but this is entirely false. The bad thing about it is that even though you are let off from payments temporarily, the accumulated bill, which you owe may come in at once.

For better explanation, take for example your lender grants you six months of not paying up your mortgage. Once you reach your forbearance period, the accumulated six months, which wasn’t paid may appear in just one month.

Now, the forbearance isn’t intended for everyone. If you feel the need to exercise forbearance, you simply have to make it known to your mortgage servicer.

Can I enter a forbearance agreement?

The choice of entering a forbearance agreement is entirely up to you. Ideally, it would be unwise to enter into a forbearance agreement knowing full well that your household finances permits you to continue paying up your mortgage. If you follow up with payments without going through on the forbearance agreement, you would be eliminating the additional interest accrued.

Related: 3 Reasons Homeowners May Need Counseling Even After Owning a Home

Why mortgage forbearance hurts your credit

You should note that mortgage forbearance can have a negative impact on your credit. Most especially when you have agreed to the terms and conditions of making payments. Should you default either in skipping or making partial loan payments, then you would fall into a state of delinquency.

Delinquency oftentimes can have a major impact on your credit score, especially the fact that they are recorded on your credit report.

With the ongoing covid-19, which is indeed a special circumstance, mortgage payments, missed can be considered as technical delinquencies.

For this reason, mortgage lenders have the right to report such cases to the credit bureaus, but don’t necessarily have to. In order to prepare better, it is important to let your lender give you a proper insight in regards to their policy, so as to be better prepared for any outcome.

In addition, credit card forbearance can be damaging to your credit score in an indirect manner. Also, should you fail in making regular payments, especially when your card issuer has extended forbearance,  the report you will likely get can hurt your credit score.

In conclusion, while it is important to get a mortgage forbearance, you should be fully ready to resume payments at the agreed time. You necessarily don’t want a closure of your account to be made known in your credit report.

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3 Reasons Homeowner Counseling May Be Good Even After You’re a Homeowner

3 Reasons Homeowner Counseling May Be Good Even After You're a Homeowner

As a young prospective home buyer, you are always advised to seek the counsel of professionals. Experts like real estate agents, accountants, even architects, are all important during your search for a perfect home to start your new life and raise your family.

But there is one professional who is the most important as they help you decide on the right time to buy a house if you should or can buy a house, and what kind of house payment your income can handle, they are Homeowner counselors.

Homeowners are a great help when looking to make a home purchase, but unlike what most people think, they are also especially useful when you have purchased your home.

Here are three(3) ways Homeowner Counseling can be of assistance to a homeowner:

  • Counseling on FHA loans

If you are having financial difficulties and in need of a loan you will need an advisor on how to go about it. Homeowner counselors provide professional advice to persons having problems with making their mortgage payments, facing foreclosure, short sale, or nigh on bankruptcy.

You will be provided counsel on providing documents to prove eligibility for second chance plans like the  FHA’s “Back to Work” loan program. Your homeowner counsel will put you through the preparation process by assessing your debt levels, educating you on the mortgage insurance, and its process of application.

  • Counseling on Reverse Mortgage

This is an issue that is popular among the elderly section of the population. It has become increasingly popular among seniors who have equity in their homes and want to take advantage of it to supplement their normal income. This step though is tricky and certainly not appropriate for everyone, as there are addendums attached to these types of withdrawals.

The only reverse mortgage legally insured by the government is HECM, the Home Equity Conversion Mortgage, and it is only available to an FHA approved lender. Before applying for such programs as the HECM program, you need to meet with a Homeowner counselor who will help provide information about repayment terms and eligibility.

Your preferred homeowner counselor will also advise you on the implications financially of these types of mortgages. Homeowner counsel will also provide you with alternate options to reverse mortgage and determine if taking this route is the best decision for you and your finances.

  • Advisory services on Foreclosure

According to the statistics, the rate of foreclosure filings is getting lower but many people still face the possibility of losing their homes due to delinquent payments. Working with homeowners counsels will help solve chronic delinquency and increases the chance of avoiding foreclosure. They help to educate you on wiser ways to go about your mortgage payments and save money while doing it, and also put you through a program to improve your knowledge and maybe save your home.

Related: Can you Refinance a Mortgage on a COVID Forbearance Plan?

Homeowner counseling apart from helping people make the best decisions on house purchases also help people avoid homelessness. They assist you in getting loans and taking advantage of allowances and exceptions in the law for homeowners. So ensure to keep in touch with your homeowner when you have a home-related problem and if possible, before you have any issues. Call us today for great references on homeowner counseling in the Western Washington Area.

 

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Bellevue Bankruptcy Attorney Bellevue Washington Lawyer

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What Documents Do I Need to Start a Mortgage Forbearance?

What Documents Do I Need to Start a Mortgage Forbearance?

With the recent coronavirus that hit the world really hard, most people have been forced to face untold hardship. This isn’t something that was bargained for by anyone, it just happened and everyone needs to adjust to the changes in the economy. The pandemic has affected the economy so badly that most people are worried sick about where their next mortgage payment will come from. However, the good news is there is always a way out because you can talk to your lender to grant you a forbearance agreement. It is an option open to everyone who has to pay their monthly mortgage payment, this way you can avoid being penalized for late payment or the foreclosure of the mortgaged property.

What is a mortgage forbearance?

Mortgage forbearance is an agreement between you and the lender to either reduce your mortgage monthly payment or defer the payment completely for a period of time. This forbearance is mostly requested by homeowners who are financially trapped and are not able to keep up with their mortgage payment. However, forbearance does not mean you won’t pay your loan again, you will still pay the amount you were not able to pay at a later date. Due to this pandemic, lenders have given borrowers a long-term forbearance agreement so they can deal with their financial problems.

While you are trying to get a forbearance, there are some documents you will be needing to give to your lender before your forbearance can be granted.

Documents needed for a mortgage forbearance

The documents needed for a mortgage forbearance actually differ by the lenders, which means you need to find out from your lender what documents you need to tender so that your application will be granted.

Application letter: Although requirements vary, but you are most likely going to submit an application letter stating your request. This application can be either oral or written because some lenders would prefer you to call them or send an online application.

Recent mortgage statement: You will need to present your most recent mortgage statement to your lender as proof that you have been keeping up with your mortgage payments to date.

Estimated monthly expenses: An estimate of your monthly expenses will also be required by your lender before they can grant you audience and listen to your plea for a forbearance.

Explanation of your financial situation: Since a poor financial situation is a reason why you need a mortgage forbearance, you would be asked to explain how bad the situation is for you. If you are out of a job or ill or any other situation, you will need to explain to your lender and in most cases show them proof of how bad things are for you so you can be granted the mortgage forbearance.

The documents listed above are what you will need to apply for aa mortgage forbearance, however, it is advised that you start the process on time so you don’t have to miss out on any payment when your forbearance has not been approved. Things are a bit difficult in the world currently and it wouldn’t hurt if you can apply for a mortgage forbearance to ease the burden of paying a loan off you until you can find your feet again.

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Bellevue Bankruptcy Attorney Bellevue Washington Lawyer

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How Low Will My Credit Drop After a Short Sale or Foreclosure?

How Low Will My Credit Drop After a Short Sale or Foreclosure?

With credit scores, one can easily predict the possibility of you making payments on time, paying off loans, and helping a lender determine whether you are a risk. Credit scores are determined by an individual’s lending history and ability to repay and manage debts based on the agreement. Factors like letting your mortgage payment slide, failure to make timely payments tend to affect your credit score. There is every tendency for your credit score to be impacted if you suffer a foreclosure or short sale, which will, in turn, make you a potential risk for a lender.

If you are thinking of taking a short sale or foreclosure for your home, after reading this, you will become aware of how much your credit score could drop. However, at this point, it is necessary to consider the meaning of short sale and foreclosure

 

WHAT IS A SHORT SALE?

With a short sale, you have the opportunity of selling your home and using the gains or proceeds from the sale to pay off your mortgage irrespective of whether the profits don’t make up the full balance. When you attempt to sell your home for even less than you owe in a short sale, the lender earns the proceeds. Not every lender will be open to the idea of a short sale, and homeowners have to be at least 90 days late for the lender to be open to that idea. In some cases, lenders might choose to forgive the unpaid balance on the mortgage or not. In some states, certain laws allow lenders to seek deficiency judgments, which ensure that you pay the difference between the balance due on the mortgage and the sale price.

 

WHAT IS A FORECLOSURE?

There is every chance for you to be faced with a foreclosure when you fail to make your mortgage payments, and the lender chooses to seize and sell your property in other to make up for their financial losses. It takes a lender four missed payments to result in foreclosure proceedings. The foreclosure process tends to vary by state, but if you are going to be faced with a foreclosure, then you would receive a notice most likely through a mail.

 

HOW LOW A SHORT SALE CAN REDUCE YOUR CREDIT SCORE

A short sale will most likely affect your credit score and not just by a small margin. It is capable of dropping it to as low as 100-150 points and that depends on where you started; your credit score will only fall more based on how high it was. Short sales are regarded as the worst things that can affect your credit score. Credit scores tend to range from 300 to 850; for example, if you have your credit score between the range of 750-800, it can easily reduce to 150 points or lower in a short sale. If you are within the range of 650-720, after a short sale, you could lose 100 points and fall into what is commonly referred to among lenders as the subprime category.

 

HOW LOW A FORECLOSURE COULD REDUCE YOUR CREDIT SCORE

Foreclosures tend to have more effect on credit scores. Now according to FICO, based on a person’s starting scores, a fair number of homeowners who go through a foreclosure experience a drop in their credit score from between 85 and 160 points. An individual with a good starting score of 680 could reduce to between the ranges of 579 and 594, which is regarded as a fair or poor score range, and someone with an excellent score of 780 may reduce between 620 and 642. Foreclosures can affect a consumer’s credit for as long as seven years.

It is necessary to understand this because a low credit score can make it difficult or impossible to borrow. Plus, as your credit scores drop, your interest rate will only continue to increase even if you are eligible for credit loans.

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Bellevue Bankruptcy Attorney Bellevue Washington Lawyer

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How Bad is Bankruptcy Really?

How Bad is Bankruptcy Really?

Filing for bankruptcy means telling the judge that you cannot pay off your debts. After this is done, the court checks your assets and liabilities then decides if you are eligible to have your debts cancelled or discharged. If it is seen that you have no means to pay back, they let you declare bankruptcy. When this is filed, you become immune to foreclosure on repossession of your property, home, or other wages. When this is successfully done, the people you legally owe have no right to collect money from you temporarily. Bankruptcy cases differ and the court can tell you to pay a few debts notwithstanding. It is safe to note that bankruptcy does not cover for student loans, child support, alimony, taxes, fines, and items purchased before filing for bankruptcy like boats, houses etc.

Filing bankruptcy is not such a great idea. For starters, the process is tasking. To file for bankruptcy, you will have to

  1. Create organized paperwork listing all the debts. Each debt has its own paperwork, you would have to get a legal group like ours to run you through the process. We have a bankruptcy attorney who specializes in helping you correct errors that can get your case dismissed.
  2. A financial coach will always be suggested for you because you would have to check other options before settling for filing for bankruptcy. It is okay to call the creditors and talk about reducing the interest rate. A financial coach would also suggest things like getting another job to you, moving into a smaller and more affordable apartment.
  3. Advantage Legal Group would always offer professional help to you, the case might leave you filing a Chapter 7 or Chapter 13 bankruptcy. As an individual, this would not be clear to you and our services will always be here to guide you.

You deserve financial freedom and we can help you understand your options. Bankruptcy can tell on your emotions because, once you file for one, it becomes a public domain. Your name and personal information become easily accessible to potential clients, employers, banks, businesses and all the details of your bankruptcy will be known.

Once bankruptcy is filed, you will not be able to take loans anymore, mortgage loans can take about four to five years to qualify. The only way you could get a new home is if you decided to pay in cash.

The good side to filing a bankruptcy is that you might be allowed to retain ownership of property. Even though a bankruptcy record stays in your file for about 7-8 years, once your dischargeable debts are paid off, your record becomes clear. You will be able to move forward and rebuild your credit. Bankruptcy is always the last option to pay off debt and stop creditors from harassing you with calls, letters, etc.

If you have questions about filing bankruptcy in Washington State including Bellevue, Redmond, Kirkland and Seattle, then its best to give the attorneys at Advantage Legal Group a call to discuss your financial situation.

 

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Bellevue Bankruptcy Attorney Bellevue Washington Lawyer

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What Do You Lose if You Declare Bankruptcy?

What Do You Lose if You Declare Bankruptcy?

Before you finally go to the judge or court to file for bankruptcy, the major worry to have is what you stand to lose. It might be your house, property, a potential job, or client as the record of your bankruptcy is available to public access. Bankruptcy is the last resort when the debt starts to choke you and the creditors endlessly harass you with unwanted calls and letters. Filing for bankruptcy leaves you at a temporary discharge from the creditors but what does it do to your credit record? What do you stand to lose after the judge approves your case?

Losing your property depends on how well you understand chapter 7 and chapter 13 when filing a bankruptcy. Chapter 7 will require that you sell some of your assets to pay off a part of the debt. The law guarding chapter 7 can be better explained to you by one of our attorney lawyers at Advantage Legal Group. This is called the liquidation and some of your property would be taken with exemption to retirement accounts, car, and house. This also allows you to relieve your debt by surrendering some of the assets belonging to you. This is meant for people with limited incomes and that is why the property is not taken. Companies and individuals can file this, and the discharge takes about three to five months to be received.

Chapter 13 bankruptcy involves the court giving you a repayment plan which protects your property if you successfully complete this plan. When this payment is completed, and some creditors are laid off, the court discharges other bills like the credit card and medical bills. This allows you as a debtor to keep your property and catch up on missed mortgage and cars. Chapter 13 allows the individual to make monthly payments for three to five years. This will require you to sell off some property to pay off debts.

The bankruptcy rules differ from state to state and there are set limits for trustees and what you can keep are within these limits called personal bankruptcy exemptions. Being able to keep your property depends on the pay you make monthly to your creditor. You can always keep your property, but it does not stop you from always falling behind on credit cards. The decision to sell your house is personal and would not be blamed on the creditor. It is natural to worry about your family and house and what you need is a financial coach or legal group like Advantage Legal Groups for consultation and advice. To avoid such fear over losing your property, chapter 7 serves as the best option for immediate debt relief.

No one wants to lose their property as what we all need is financial freedom. Our help runs from businesses to individuals and families, this is the right time to contact us if you are in Washington state including Bellevue, Redmond, Kirkland, and Seattle. Let us assist you in a difficult time as this one.

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How Far Behind Do I Have to Be For Mortgage Forbearance?

How Far Behind Do I Have to Be For Mortgage Forbearance?

Under normal circumstances, there are policies owned by all lenders, and that is what you should be working with. However, if you are finding it difficult paying you mortgages either due to lose of job or increase in costs. There is a 15-day grace period, and if you are able to meet up and make payment, you are all good but if you happen to miss your second payment, it is said that you have defaulted and you should expect a change in your mortgage servicer.

Once you have noticed that you won’t be able to meet up with your payment, it is advisable to contact your lender and discuss mortgage forbearance.

MORTGAGE FORBEARANCE

This is an official agreement between the home owner (you) and the lender, if for any reason you are unable to pay your monthly mortgage amount. Your payment requirements will be frozen by the lender for a period of time. After the agreed period elapses, you are expected to continue your normal monthly payments and you will also pay back all balance owed, including all interests gathered during your grace period. This sounds like a great deal especially to those who have lost their jobs during this Coronavirus crisis, it helps you skip some or all of your monthly mortgage payment for as much as a year. But it should be considered as your last resorts, and should be avoided if possible because while it can be a life line for a short period, it will undoubtedly lead to credit issues.

More: Is Mortgage Forbearance a Good Idea?

HOW TO WORK WITH YOUR LENDER TO GET FORBEARANCE

STEP 1: REACH OUT

Contact your lender and inform them about your present crisis financial state. Some of them have online chat options or a forbearance form you can use also. Some key information and documentation will be needed by your lender, so be prepared to provide these:
• An outline of your financial state, also the cause of the financial issues and when you think all be fixed back to normal.
• Mortgage loan or your account number
• Your monthly income before taxes
• Monthly expenses clearly itemized

Remember, that your lender wants you to keep your home and keep paying your mortgage so they will do their best to help, don’t be afraid to ask for help.

STEP 2: REQUEST

The lender must follow some steps before granting you the forbearance agreement. They might ask you to make some deductions on your monthly expenses, if they notice some things that are not needed on your list; you should be able to explain to them why those things cannot be removed from your list, you will also prove that you are making efforts to get a new paying job.

STEP 3: SUBMIT

Your lender will want to confirm your financial crisis, provide them with your unemployment verification letter with detailed information. Follow up your lender until a negotiator or loan officer is assigned to your account, which you will work with till the end of the process.

STEP 4: WAIT

After you are assigned with a negotiator, you have to wait for approval, sometimes it takes several weeks but ensure you follow up with your negotiator to show that you are serious with your request.

STEP 5: RECEIVE

Once you are approved, a letter with detailed terms of the agreement will be drafted by the negotiator, with the forbearance period time frame, amount to be paid during that period, the interest rate of the amount owed and how to repay the outstanding balance after the period.

STEP 6: SIGN AND RETURN

If you are satisfied with the terms, sign the agreement form and return to the lender. Your forbearance period has commenced after submission. After this period your payments return to normal, with an additional payment to cover your outstanding balance.

Assuming you fail to meet up with the terms of forbearance, your home will likely go into foreclosure. This is the last step before you lose ownership of your home.

For legal advice and consultation,  as well as information regarding mortgage modification or mortgage mediation services Please give us a call for a free consultation to discuss your specific financial challenges during this difficult time. You can reach us at 425-452-9797 

 

Can I Claim Forbearance 4 Months Into COVID-19?

Can I Claim Forbearance 4 Months Into COVID-19?

The whole world is facing a pandemic that is not just making life different for all of us but it is equally causing major financial problems for some individuals. Individuals and countries are facing financial hardship in this coronavirus crisis. Forbearance is when your lender or mortgage servicer allows you to temporarily pay your mortgage at a lower payment or pause paying your payment. You can be able to make the paused payment later.

During this period, the lender or servicer won’t enforce a foreclosure. The terms of a forbearance payment differ from lender to lender. If an unplanned hardship makes you fall behind on your payment of a mortgage, an agreement based on forbearance might be compassionate enough to allow you to hold off the payment until your situation gets better. The lender can also extend the time of the payment if you haven’t resolved your financial issue at the estimated time of the forbearance payment.

It is no fault of yours that the coronavirus is affecting you financially and your servicer or lender understands that and would also give you more time prior to what’s on the mortgage payment agreement. The thing is that putting off the mortgage payment and claiming forbearance might currently not be the best option right now, as it might pose to be a problem for you in the near future.

Related: Is Mortgage Forbearance a Good Idea?

The lender or servicer might ask that you pay off all the debt at once and this would be draining to your pocket. In order to still be able to claim forbearance 4 months into COVID-19, you would have to show proof to your bank or lender to show that you are still financially unstable. You can also opt into the CARES Act that was signed in on March 27. If you can’t make payments, it’s best to call your lender also but at this time reaching your lenses might be hard due to financial overload. The CARES act lets you still pause your mortgage payment six months into the signed agreement. Another six months can be added to your already paused months if you ask for it. As long as you keep reaching out to your lender, you can still claim forbearance.

For legal advice and consultation,  as well as information regarding mortgage modification or mortgage mediation services Please give us a call for a free consultation to discuss your specific financial challenges during this difficult time. You can reach us at 425-452-9797 

Should I Hire a Lawyer to Help with Mortgage Mediation

Should I Hire a Lawyer to Help with Mortgage Mediation

Foreclosure Defense Help with a Mortgage Mediation Attorney

Do you need a lawyer to help with mortgage mediation? This is a common question we get nearly every week and if you’re struggling to pay your mortgage based on job loss or some other economical setback, you might consider applying for a loan modification. You’ll need to decide if it’s worth paying for an attorney to help you with this process. You can apply for a mortgage modification on your own but many lenders may not even discuss this with you without the help of an attorney. Many lenders or banks, whoever has your mortgage, may have their own rules.

A loan modification is a permanent restructuring of your mortgage where your lender can change the terms so that it’s more affordable. They may be able to reduce the interest rate, convert a variable or adjustable interest rate to a fixed one, forbear some of the principal balance or extend the term of the loan. For instance, if you need to take three months off, they may be able to attack those three months onto the end of the mortgage.

It’s also important to know that if Fannie Mae or Freddie Mac is the one that owns your loan you might qualify for a flex modification which is a special loan program.

Typically, you’ll need to submit an application to your lender along with certain documents like pay stubs, bank statements, and proof that your income has decreased. It’s also important to contact your lender and ask them about their rulings when it comes to mortgage modification and if there needs to be a mediator.

A mortgage modification attorney can obviously explain all of the details behind this type of modification. Depending on your individual circumstances, a lawyer may recommend pursuing a modification, fighting the foreclosure, or putting the property up for sale in a short sale or deed in lieu of foreclosure. These are different options that a lawyer can definitely explain.

Mortgage modification paperwork can also be extensive. A lender can help you fill out the application, explain what documentation you need to submit with the application, and how to explain your financial hardship.

Foreclosure Defense mortgage mediation attorney real estate lawyer

Because we are in Washington state, we have the Washington Foreclosure Fairness Act. This is specifically for Washington state and provides homeowners with an alternative to the frustrating and endless mortgage modification process. If you have a national lender they may not understand this process and may quickly disregard so having an attorney that understands the process, your rights, and how Washington homeowners are different than the rest of the country, really makes a lot of sense.

An attorney will also help you if your loan servicer violates federal or state loss mitigation laws. If they are forcing you to foreclose before 120 days after you’ve default on the loan, you need a lawyer in your court that can help enforce your rights. It’s extremely difficult to get your home back after a completed foreclosure so having an attorney on your side gives you a better chance of getting the results you want.

Give us a call today to learn more about loan modification and if you need a mortgage mediator. We’d be happy to discuss issues over the phone and move forward if necessary.

More: Will a loan modification lower our payments?

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Foreclosure Defense and Mortgage Mediation in Bellevue, Seattle and Washington State 

In the following video that aired on King 5 New Day show Attorney Jonathan Smith talks about Mortgage Mediation and Foreclosure Defense for Washington State homeowners facing foreclosure on their Northwest home in Bellevue, Seattle, Federal Way, Redmond, Kirkland, Issaquah, Sammamish or Western Washington.

 

Will Bankruptcy Forgive Student Loans?

Will Bankruptcy Forgive Student Loans?

Will student loans ever be forgiven during bankruptcy? The answer is: PERHAPS! President Obama spoke to the Georgia Institute of Technology recently on March 10, saying that his administration is looking into the idea. He revealed that he’d ordered officials to look into whether or not making student loans forgivable during bankruptcy would be helpful to millions of Americans who are under the burden of severe student debt.

The White House has made a series of efforts to alleviate student debt in America and student loan forgiveness during bankruptcy is the latest. Currently, bankruptcy laws protect student debt by being wiped away by a bankruptcy filing. However, with the tremendous, crippling weight of student loans, lawmakers are seeking new, flexible ways to students from a future trajectory of financial hardship. The goal is to make college more affordable for young people so that once they graduate, they aren’t so burdened with debt that they can’t do anything else.

The WSJ offered the following numbers on U.S. student debts:

  • -In the last seven years, U.S. student debt has more than doubled.
  • -Almost 25% of current borrowers are behind on their payments.
  • – The average student loan debt nationwide is right below $30K.
  • -The government lends 90% of the national student debt.

In his speech, President Obama offered only a few first ideas and details of this effort. It wasn’t clear whether or not an eventual proposal would address only loans issued by the Federal Government, or would also somehow affect private loans as well, such as those issued by firms like Wells Fargo & Co. and the like.

Obviously, the president’s interest in changing bankruptcy law is still in its formative stages, but even if the White House did come up with a change, it would likely face huge opposition in the Republican-controlled Congress. As the WSJ also reports, it is still unclear how effective changing bankruptcy law would be in really helping borrowers anyway. They report that only 713 bankruptcy filings in 2014 were filed to seek student loan relief.

Get the latest video above.