You May Be Able To Discharge Student Loans In Bankruptcy
A common myth about consumer bankruptcy cases, including both Chapter 7 and Chapter 13 cases, is that student loan debt is a type of non-dischargeable debt. While it has, historically, been more difficult to have student loan debt discharged than other types of debt, it has not been impossible. Even so, the process has been complex and has required debtors to be involved in lengthy and complicated adversary proceedings and bankruptcy cases that have cost a lot of time and money. With new guidance from the Biden administration, and a new fact-gathering process for determining whether a debtor has met the “undue hardship” requirement for discharging debt, more debtors are likely to see their student loan debt discharged.
Easier to Present Evidence of Undue Hardship and to Have It Assessed
Rather than going through a lengthy and complex process to present evidence of undue hardship, most of this information will now be contained in a single form (the attestation form). From that information, the Justice Department can assess the debtor’s circumstances and whether they have met the undue hardship requirement.
What is the undue hardship requirement? In short, to have your student loans discharged in bankruptcy, you must have proof that continued repayment (or repayment attempts) would constitute an undue hardship for you. This will remain a difficult burden to meet.
Assessing the Debtor’s Ability to Meet the Undue Hardship Requirement
As guidance from the Justice Department explains, the attestation form provided by the debtor will allow the Justice Department to assess the debtor’s present circumstances, the debtor’s future circumstances, and the debtor’s good faith in attempting to repay student loans in the past. All of these factors are important for determining whether it would constitute an undue hardship for the debtor to continue to make payments on student loans, and whether the debtor’s student loans should be discharged in their bankruptcy case.
How will the specific determinations be made for each of those three major factors? The guidance from the Justice Department outlines evidence that will be important, including detailed information about the debtor’s income and assets in relation to necessary and reasonable expenses, the debtor’s age and health, the debtor’s education level and future employment prospects, whether the debtor has enrolled in an income-driven repayment (IDR) plan in the past or sought information about IDR plans, whether the debtor has made payments on student loans in the past, whether the debtor has sought consolidation or a deferment or a forbearance, and other factors.
Contact Our Bankruptcy Lawyers in West Palm Beach
Are you struggling with student loan debt? Whether you have private or federal student loan debt, you may be able to have that debt discharged in a personal bankruptcy case. You should get in touch with one of the experienced West Palm Beach bankruptcy attorneys at Kelley Kaplan & Eller to learn more about how the new guidance on discharging student loan debt will impact your case in a helpful way, and how to move forward with a Chapter 7 or Chapter 13 bankruptcy filing. Do not wait to get in touch with us. We can speak with you today about your debt and getting started on a bankruptcy case.