Changes to Student Loan Discharges Are “Life Changing”

If you have student loans and are struggling to make payments, you should find out more about the new process for having student loans discharged in bankruptcy. While the process for having student debt discharged used to be time-consuming, complex, and costly for many debtors, the US Department of Justice and US Department of Education have streamlined the process significantly, and many South Florida debtors could be eligible to have their student loans wiped out entirely by filing for personal bankruptcy. To be sure. A recent report from CNBC calls the new process for discharging student loans “life changing” and emphasizes that a wide range of debtors could be eligible. Our West Palm Beach bankruptcy lawyers can tell you more.

Learning More About Background of the New Process 

The new process for discharging student loans, as the CNBC report explains, was announced through new guidelines issued by the US Department of Justice and US Department of Education in the fall of 2022. The guidelines underscored that the long-existing requirements for receiving a discharge of student loan debt in bankruptcy would not change, but the process for meeting the requirements would be significantly streamlined to make it easier for debtors. As the guidance explains:

“Congress has set a higher bar for discharging student loan debt compared to other debt—debtors who seek to discharge student loans must prove in a separate ‘adversary proceeding’ that paying their student loans would impose an ‘undue hardship.’ But that higher bar need not be an insurmountable barrier for debtors who cannot afford to pay their student loans.”

What to Expect with the New Process 

What should you expect if you are considering filing for bankruptcy and asking the court to discharge your student loans? You will still need to prove that continuing to make student loan payments would impose an undue hardship on you, and you must still file an adversary proceeding, but the overall process is much simpler than it used to be.

Rather than going through a complex adversary filing, you will simply work with your attorney to complete a 15-page attestation form that provides detailed information to the DOJ about your financial circumstances, likely financial circumstances in the future, and your efforts to repay your student loans. Then, DOJ attorneys will use the form to assess the following three factors:

• Your current ability to pay your student loans;
• Your future ability to pay your student loans; and
• Your good faith efforts to handle your student debt in the past.

In assessing those factors based on your information, the court can recommend that the bankruptcy judge fully or partially discharge your student debt.

Contact a West Palm Beach Bankruptcy Lawyer Today 

The news that student loans can be more easily discharged in consumer bankruptcy cases has been very good news for debtors throughout South Florida and across the country. We want to emphasize that, although the underlying “undue hardship” requirement has not changed, the process has changed in a meaningful way, and a bankruptcy lawyer can help you to seek a discharge of your loans with relative ease in a personal bankruptcy case. One of the experienced West Palm Beach bankruptcy attorneys at Kelley Kaplan & Eller, PLLC can talk with you today about your student loans and eligibility for discharge, and what to expect with the new process. Contact us for more information.

Sources:

cnbc.com/2024/03/12/biden-makes-it-easier-to-forgive-student-debt-in-bankruptcy.html

justice.gov/d9/pages/attachments/2022/11/17/student_loan_discharge_guidance_-_fact_sheet_0.pdf