Student Loan Debt

On November 17, 2022 the Department of Justice issued new guidance regarding requests to discharge a federal student loan in bankruptcy.  

Prior to this new guidance, I would have told you that a federal student loan was pretty much impossible to get rid of in a bankruptcy.  Why impossible?  I would always tell clients that they were stuck with their federal student loans because federal bankruptcy law protects student loans from discharge “unless excepting such a debt from discharge under this paragraph would impose an undue hardship on the debtor and debtor’s dependents.” 

Prior to the new guidance, an undue hardship was difficult to prove because debtors could enroll in an income-based repayment plan.  Sometimes, you could qualify for $0 payment.  How could you argue that a $0 payment was an undue hardship?

Now, things seem to be different.  I might actually be able to help you get rid of federal student loan debt in a bankruptcy.  It’s still not going to be easy to wipe out your federal student loan debt, but I’m now willing to give it a try.  If you fall into one of the following categories you should call, text, or email me so we can talk about whether you should try to get rid of student loan debt in bankruptcy:

  1.  Are you age 65 years or older?
  2.  Did you get a federal student loan, but never obtained a degree?
  3.  Have you been making payments on your student loan debt for 10 years?
  4.  Do you have a disability or illness impacting your income potential?
  5.  Have you been unemployed for 5 of the last 10 years?

If you answered yes to any of the five questions above it might be possible to wipe out your federal student loan debt in a bankruptcy based upon the new guidelines. 

You still need to demonstrate that your disposable income (based upon IRS expense standards) is too low to provide you an ability to repay your federal student loans.  And, you’ll have to show that you made a good faith effort in the past to repay your student loan.  Additionally, if you have too many assets this might present an obstacle to discharge of student loan debt as well.  But, if you fall into one of the five categories above than you should call, text, or email me so we can discuss your situation further.

Eric Seyvertsen, Attorney

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