Biden Administration Makes It Easier To Have Debt Discharged Through Bankruptcy



While certain student loan borrowers can use the bankruptcy process to have their loans discharged, the process has been very cumbersome — but this might change thanks to new guidelines.

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In January, the Justice Department updated the attestation form that borrowers must complete to seek bankruptcy discharge of their federal student loans, Forbes reported. These changes include “tweaks to the reporting of monthly household income, clarifying instructions regarding when a borrower needs to provide additional information, new questions seeking details on whether a school closure impacted a borrower’s ability to repay their student loans, and more detailed information on a borrower’s student loan repayment, deferment, forbearance, and consolidation history.”

In addition, the updates stated that if the borrower is disabled, the disability does not have to be “permanent,” only “chronic” to potentially be a basis for a bankruptcy discharge.

This comes on the heels of the Department of Justice (DOJ), in conjunction with the Department of Education, issuing new guidance to simplify the process and establish standards for borrowers who seek to discharge their federal student loans in bankruptcy last November.

The DOJ said at the time that the new process will help ensure consistent treatment of the discharge of federal student loans, reduce the burden on borrowers of pursuing such proceedings and make it easier to identify cases where discharge is appropriate, according to a press release.

“Today’s guidance outlines a better, fairer, more transparent process for student loan borrowers in bankruptcy,” Associate Attorney General Vanita Gupta said in the November release. “It will allow Justice Department attorneys to more easily identify cases in which we can recommend discharge of a borrower’s student loans. We are grateful to the Department of Education for its partnership in developing this guidance.

Indeed, the National Consumer Law Center noted that student loans are dischargeable in bankruptcy only because of undue hardship, and current bankruptcy court practice has made “such discharges difficult to obtain while being overly intrusive in requiring personal information from the debtor,” something the new guidance seeks to rectify.

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It’s important to note that the new updates are still fresh, so it’s too early to gage their success.

“Borrowers interested in pursuing a bankruptcy discharge of their federal student loans should consult with a bankruptcy attorney licensed to practice in their state,” Forbes reported, adding that you can find a local bankruptcy attorney via the National Association of Consumer Bankruptcy Attorneys, or you can contact your state or local bar association for a referral.

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This article originally appeared on Student Loan Forgiveness: Biden Administration Makes It Easier To Have Debt Discharged Through Bankruptcy

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