Bankruptcy Can Help with Your Student Loans

For quite some time, consumers with student loan debt who were considering bankruptcy were either under the misconception that student loan debt was impossible to discharge, or they had heard stories about the extreme difficulty of having student loans discharged through individual bankruptcy filings. Although educational debt is identified as an exception to discharge in the US Bankruptcy Code, it is important to know that there has long been an exception to that exception — in other words, it has not been impossible to discharge student loans, although it has been more difficult than having unsecured debt like medical debt or credit card debt discharged. Yet even better news is here now for debtors with student loans. Guidance issued by the US Department of Justice (DOJ) in late 2022 clarified that the process for proving that your student loans should be discharged would become much easier and less complicated.

The overall requirement — undue hardship — remains the same, but the process for having your student loans discharged in a bankruptcy filing is now significantly easier. To reiterate, bankruptcy may be able to help with your student loans. What do you need to know? Considering the following information from our West Palm Beach bankruptcy lawyers.

No More Adversary Proceedings That Are Extremely Complicated and Time-Consuming 

In order to have your student loans discharged in a bankruptcy case, you will need to show that continuing to make payments on your student loans would impose an undue hardship on you. To prove this “undue hardship” requirement, you must file an adversary proceeding. Adversary proceedings are like lawsuits that run alongside bankruptcy cases — they are separate but connected. You might be thinking that this sounds incredibly complicated, and it used to be quite complex and time-consuming. However, the process has now changed.

While you will still need to file an adversary proceeding according to the DOJ guidance, the process for proving that continuing to make payments on your student loans would impose an undue hardship on you is significantly easier and quicker. Now, with assistance from your lawyer, you will fill out a streamlined form called an “attestation form.” In that form, you will provide details about your financial circumstances (in the present, as well as information that allows the DOJ to accurately consider your future financial circumstances), and details about your past efforts to repay your student loans.

Once the DOJ receives this form — 15 pages in total — it will assess three factors: 1) Your present ability to pay; 2) Your future ability to pay; and 3) Your good faith efforts to pay or manage your student loans previously. Then, the DOJ lawyers will make a recommendation to the bankruptcy court concerning the discharge of your student loans. The recommendation may be for a full discharge, a partial discharge, or in some cases, no discharge.

Contact a West Palm Beach Bankruptcy Lawyer Today 

Anyone with student loans who is struggling to make payments should get in touch with an experienced West Palm Beach bankruptcy attorney at Kelley, Fulton, Kaplan & Eller to find out about the possibility of having their student debt discharged. Student loan payments are crippling for many residents of South Florida, and our firm is committed to helping student debtors to seek discharges. We have the experience and tools to assist you with your student loan debt in a bankruptcy filing.

Sources:

law.cornell.edu/uscode/text/11

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