The Biden administration said on November 17, 2022 that it will make it easier for student borrowers in financial distress to discharge their student loan debt in bankruptcy.
Currently, it’s hard for people who declare bankruptcy to get their student debt erased, with debtors having to prove in a separate proceeding that paying their college loans would impose an “undue hardship.” One study found that only 0.1% of people with student loans who filed for bankruptcy protection even tried to get their higher education debt discharged.
Department of Justice officials said the new guidance will make it easier for borrowers who didn’t think they could get relief through bankruptcy to find out whether they can get their loans discharged. Typically, a court reviews the borrower’s past, present and future financial circumstances to determine if the person is facing undue hardship. Under the new guidance, the borrower may be asked to submit income information to the government. The Department of Justice, in consultation with the Department of Education, will then review the information provided and determine whether to recommend that the bankruptcy judge discharge the borrower’s student loan debt.
“Today’s guidance outlines a better, fairer, more transparent process for student loan borrowers in bankruptcy,” Associate Attorney General Vanita Gupta said in a statement. “It will allow Justice Department attorneys to more easily identify cases in which we can recommend discharge of a borrower’s student loans.”
The new guidance provides a framework to evaluate the factors that courts typically consider in determining undue hardship. It will make it easier for debtors to know whether or not their student loans can be discharged in their bankruptcy case or not.
This new guidance can be a great blessing to thousands of people hampered by student loan debt. If you live in Louisville and are struggling with student loans, contact Michael at Wetterer & Clare for a free consultation to review your situation.