Getting Relief from Student Loans through Bankruptcy
Student loan payments will soon resume, and borrowers cannot expect forgiveness under the Biden Administration’s previously proposed plan for loan cancellation. To be sure, the U.S. Supreme Court struck down the plan to cancel between $10,000 and $20,000 of federal student debt for each borrower earning under a certain amount each year. As a result, student loan borrowers need to anticipate restarting payments and what that will mean for their personal finances. For many borrowers, it will be difficult, and potentially impossible, to afford to resume student loan payments. There is good news for many borrowers who may be considering bankruptcy: The U.S. Department of Justice issued new guidance that will make it easier to have student loans discharged in bankruptcy.
How do the new guidelines actually work? Our West Palm Beach bankruptcy attorneys can explain.
Department Attorney Will Evaluate Debtor’s Circumstances, Stipulate to the Facts, and Make a Recommendation for Discharge
According to the new guidance, when a debtor seeks to have student loans discharged in bankruptcy, the Department attorney will evaluate the debtor’s financial circumstances and will “stipulate to the facts demonstrating that a debt would impose an undue hardship and recommend to the court that a debtor’s student loan be discharged if three conditions are satisfied.” Those conditions include the following, cited in the guidance:
- Debtor presently lacks an ability to repay the loan;
- Debtor’s inability to pay the loan is likely to persist in the future; and
- Debtor has acted in good faith in the past in attempting to repay the loan.
The fact that Department attorneys will be stipulating to the facts that prove the debtor has met the requirements for a discharge (or in some cases a partial discharge) will make the process significantly easier, and more debtors are likely to have student loans discharged in bankruptcy under the new guidance. It is important to know that the requirements themselves for discharge will not change, but the process will be easier and more streamlined.
How Debtors Will Prove They Meet the Requirements
Rather than providing a wide range of evidence in various forms, debtors will provide the evidence that the Department attorneys need to evaluate their case by completing an attestation form. In the attestation form, the debtor will provide information about their income, expenses, ability to pay their student loans, and past attempts to repay loans or to seek assistance with their repayment plans. Even if the Department attorney does not recommend a discharge, they can still recommend a partial discharge for a debtor.
Contact a Bankruptcy Attorney in West Palm Beach
If you currently have student loan debt and are expecting to struggle with student loan payments once they resume this fall, it is essential to get in touch with an experienced West Palm Beach bankruptcy lawyer at Kelley, Kaplan & Eller who can assist you. We have years of experience representing clients in personal bankruptcy cases, and we are prepared to help you seek a discharge of your student loans in your bankruptcy case. Do not hesitate to contact us to learn more about how we can assist you.