The road to having student loans forgiven in a bankruptcy case is certainly not an easy one, which is why so many borrowers forgo pursuing bankruptcy for fear that they will never be able to receive relief from their largest source of stress: their student loan debt. However, all of this could change very soon due to new guidelines issued by the Biden Administration.
In January 2023, the Justice Department updated the required attestation form that borrowers pursuing bankruptcy must complete before being able to seek a bankruptcy discharge of their federal student loan debt. The changes to the form include several modifications, including small changes as to how monthly household income is reported, instructions clarifying when a borrower needs to provide the court with additional information, and new questions looking for information on whether a school closure impacted the borrower’s ability to pay his or her student loans. The changes to guidelines also include more detailed information regarding the borrower’s student loan repayment history, including any consolidations made, deferments, or forbearances.
These changes to the guidelines also include updates that if the borrower is disabled, the disability does not have to be classified as permanent to be a basis for a bankruptcy discharge. Chronic disabilities will also be considered as factors when determining whether to discharge federal student loan debts.
These most recent changes come just after the Department of Justice and Department of Education joined forces to issue new guidance in hopes of simplifying the process and establishing firm standards for borrowers who are seeking to have their federal student loans discharged in bankruptcy. Those guidelines were issued in November 2022. It is hoped that these changes will make sure that borrowers are treated consistently when seeking student loan discharges. They also reduce the burden that has previously been placed on borrowers in these proceedings, in hopes of making it easier to identify situations where a bankruptcy discharge of federal student loan debt is appropriate.
Under previous standards, student loan debts could be discharged in bankruptcy cases only when the borrower could show evidence of undue hardship. Bankruptcy courts across the country created their own standards for defining exactly what undue hardship entailed, which resulted in inconsistent standards across the country.
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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 www.miamibankruptcy.com.