Do I Still Need To Prove Undue Hardship To Discharge Student Loans In Bankruptcy?
With new guidance from the Department of Justice on the process for discharging student loans in bankruptcy, it is important to understand what has changed and what has not changed. For many Floridians with student loan debt who are considering bankruptcy, the news about the new guidance appears to be positive, but it may not be clear what it actually means in practice for debtors who are seeking to have their student loans discharged in a Chapter 7 or Chapter 13 bankruptcy case. In particular, debtors with student loans who are considering bankruptcy may know that part of the difficulties of this process prior to the new guidance involved proving an “undue hardship.” Accordingly, those debtors may be wondering: do I still need to prove an undue hardship to have my student loans discharged in bankruptcy?
The answer is yes, but this is the very significant thing to know: the process for proving an undue hardship has become significantly easier for many debtors based on the guidance. Our West Palm Beach bankruptcy attorneys can provide you with additional information, and we can speak with you today about your bankruptcy plans in Florida.
Debtors Must Still Meet the Undue Hardship Requirement
The new guidance has not eradicated the undue hardship requirement. This requirement still exists, but it is important for debtors to know that the guidance changes the way debtors present evidence of undue hardship and how the Department of Justice attorneys assess the information (and the debtor’s eligibility to have their student loans discharged in bankruptcy).
How the Department of Justice Assess the Undue Hardship Factors Under the New Guidance
With the new guidance, the Department of Justice will be assessing three undue hardship factors:
- Present ability to pay, assessed by comparing the debtor’s expenses to income;
- Future ability to pay, including factors like age, employment history, and disability; and
- Good faith factors, including whether the debtor has made reasonable efforts to take steps toward repaying their student loans, or being able to repay their student loans.
In addition, the Department of Justice will make these determinations based on information the debtor includes in an attestation form. That 15-page document asks for a wide range of financial details designed to show whether or not the debtor is likely to meet the undue hardship requirement.
Contact a West Palm Beach Bankruptcy Lawyer
Are you considering bankruptcy to have your student loan debt discharged? Like many debtors, you might have seen the news about new guidance on this process from the Department of Justice, and you may be wondering about your eligibility for a discharge of your student loan debt. Based on the new guidance, debtors should be able to expect a much easier and more streamlined process for meeting the undue hardship requirement and being eligible for a discharge of their student loans. An experienced West Palm Beach bankruptcy attorney at Kelley Kaplan & Eller can evaluate your financial circumstances for you today and provide you with more information about proving an undue hardship based on the new guidance.