Getting Student Loan Forgiveness in a Bankruptcy Filing?

Despite a lengthy pause on federal student loan payments, those payments restarted in fall 2023, and many borrowers in South Florida have been struggling to make payments after becoming accustomed to the pause. During the pause, President Biden initially indicated that anywhere from $10,000 to $20,000 of an individual’s federal student loans would be forgiven, depending on the types of loans they had taken out as undergraduates. However, as federal student loan borrowers know, the US Supreme Court ruled that Biden did not have the authority to cancel loans as he had indicated, and debtors did not receive any forgiveness.

Although discussions of blanket student loan forgiveness of the type discussed above are no longer in the picture, many student debtors are realizing that bankruptcy could function in a similar way to student loan forgiveness. You might be wondering: is it possible to get student loan forgiveness in a bankruptcy filing? In short, the US Department of Justice and US Department of Education have made it significantly easier for student loan borrowers to have their educational debt discharged in bankruptcy. A West Palm Beach bankruptcy at our firm can tell you more.

What is a Bankruptcy Discharge? 

What is a bankruptcy discharge, and what is its relationship to debt forgiveness? According to the US Courts, a “bankruptcy discharge releases the debtor from personal liability for certain specified types of debts,” meaning that “the debtor is no longer legally required to pay any debts that are discharged.” A discharge is permanent, and debtors do not owe taxes on any amount that is discharged in a bankruptcy case.

Is this similar to or the same as forgiveness? According to Federal Student Aid, “the terms forgiveness, cancellation, and discharge mean the same thing, but they’re used in different ways.” Further, according to Federal Student Aid, “loan forgiveness, cancellation, and discharge are the removal of a borrower’s obligation to repay all or a portion of a loan.” While Federal Student Aid says these terms are essentially the same, it is important to know that they are used in different contexts and may have some distinctions, depending on the circumstances. A discharge is a removal of a debt obligation through bankruptcy. Cancellation or forgiveness of debt also removes a debt obligation, but in some cases the amount that is canceled or forgiven can be taxable.

Eliminating Your Obligation to Pay Student Loans through Bankruptcy 

If you are eligible to have your student loans discharged in bankruptcy, you will no longer be responsible for that debt obligation.

To have student loans discharged, you will still need to meet the “undue hardship” requirement, but you will show your eligibility by filling out a simplified 15-page attestation form that includes detailed information about your financial situation. A lawyer is here to help.

Contact Our West Palm Beach Bankruptcy Attorneys Today 

Are you struggling with student loans? It is a good time to get in touch with one of the experienced West Palm Beach bankruptcy lawyers at Kelley Kaplan & Eller, PLLC to find out more about your eligibility for having your student loans discharged through bankruptcy. As we have explained above, although the overall requirements for a discharge of educational debt have not changed, the process for showing that you meet the requirements has changed — and that change to the process makes it a lot easier for Floridians with student loan debt to have their student loans discharged. We can assess your circumstances for you today and begin working with you on a bankruptcy case to have your student loans discharged.

Sources:

justice.gov/d9/pages/attachments/2022/11/17/student_loan_discharge_guidance_-_guidance_text_0.pdf

studentaid.gov/help-center/answers/article/difference-between-loan-forgiveness-cancellation-and-discharge

uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/discharge-bankruptcy-bankruptcy-basics