In November 2022, the Justice Department and Department of Education announced a “fairer and more accessible” bankruptcy discharge process for student loan borrowers. This is exciting news!
“Congress may have set a higher bar for granting student loan discharges during bankruptcy, but in practice that bar has become very difficult for deserving borrowers to clear,” said U.S. Under Secretary of Education James Kvaal. “After decades of inaction in Washington, our Department of Education team was determined to partner with the Justice Department to craft clearer, fairer, and more practical standards to guide recommendations for student debt discharges during bankruptcy proceedings. This guidance is an important step toward helping struggling borrowers, many of whom never completed college or were misled into debt by dishonest schools.”
This guidance applies to:
The new guidance applies to Direct Loans and other loans held by the Department of Education, but not to FFEL loans held by guarantors or Perkins Loans held by the school. The Department of Education may issue similar guidance or a letter for FFEL and Perkins loans in the future. Note: This guidance does not apply to private student loans.
The process after this guidance:
When you want to include your student loans in your bankruptcy case, your Bankruptcy attorney will have to file a lawsuit called an adversary proceeding and complete an attestation form. This form will help the Department of Education and the U.S. Department of Justice understand your situation and whether you face an undue hardship. They will use the information you provide on the form to recommend to the bankruptcy judge whether to discharge part or all of your student loan debt or deny your request.
How can I discharge my student loans through Bankruptcy?
If you want to know if you can get rid of your student loan debt through Bankruptcy, the first step is to talk to a bankruptcy lawyer. Scott Ciolek, a Toledo, Ohio, bankruptcy attorney, offers a free consultation that you can schedule instantly online. He will review your financial situation to see if you can discharge your student loan debt through Bankruptcy.