Bankruptcy Law, Debt Relief, Student Loans, Timothy Kingcade Posts

Student Loan Borrowers Seeing Some Relief from Bankruptcy Judges

Student loan borrowers are beginning to see some relief in bankruptcy court when it comes to discharging student loan debt. At the start of 2018, the Department released a statement that it was reviewing student loan bankruptcy laws with respect to how difficult it has been for borrowers to receive a discharge of their student loan debt in bankruptcy. Following this statement, some bankruptcy court judges have lessened the standards borrowers are held to when deciding on whether the loan obligation should be discharged.

Since the statement was made by the Department and subsequent request for comments on the current policy, no updates have been given as to whether the Department would be making official policy changes. In the meantime, bankruptcy court judges seemed to have taken a cue from the Department and are now making rulings to make loan repayment terms easier on borrowers for the meantime.

A recent Wall Street Journal report found that judges were more becoming more lenient when dealing with individuals saddled with student loans. Current college graduates are now entering the workforce with well over six figures in student loan debt. Unless these graduates land a job making an income that is comparable to this debt, these individuals soon find themselves unable to make student loan payments. Bankruptcy is meant to provide individuals drowning in debt with a way out, but the current policy with respect to student loan debt has dictated that this obligation stays with the debtor even after a bankruptcy discharge of all other debts.

The study looked at 50 current and former bankruptcy court judges, reviewing bankruptcy cases where the filer had student loan debt. The study showed that a number of the judges were very sympathetic to the cause of the individuals in front of them who were not able to pay their current student loan debt obligations. In fact, many of them understood the struggle all too well with student loan debt since they may also carry debt from law school, or they may be influenced by the struggles they see with their law clerks finishing or graduating from law school. It is estimated that the average lawyer holds just under $120,000 in student loan debt.

These judges are required to follow the legal standard that a borrower must pass the “undue hardship test,” which has traditionally been a strict standard. It has also been a standard that has never been clearly defined by bankruptcy law and has been applied inconsistently from court to court.

Congress has never given a clear definition for what undue hardship consists of, but many courts have used the “Brunner” test to determine what this means.

The Brunner test requires that the borrower show that he or she has made a good faith effort in repaying the debt, that the financial circumstance is such that the person cannot have a reasonable standard of living if he or she has to repay the debt, and this financial situation is likely to continue in the future.

Even though the judges’ hands may be tied by the legal standard, they may seek other, more creative solutions to help the borrowers ease their burdens. They may not be able to completely cancel the debt in all situations, but they have tried to help alleviate some of that burden. In some cases, however, some of the more sympathetic judges have completely cancelled the borrower’s past due debt obligation.

For borrowers who are struggling with student loan debt, relief options are available.  Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. There are ways to file for bankruptcy with student loan debt.  It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at

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