Americans with student loan debt have long been told that it’s virtually impossible to discharge any of that debt in bankruptcy. The requirement of having to prove “undue hardship” has resulted in under 0.1% of people with student loan debt even attempting to seek relief for it through bankruptcy.
That’s all about to change thanks to a partnership between the Department of Justice (DOJ) and the Department of Education (ED). They’re implementing a process where those seeking to discharge their debt in bankruptcy can submit an extensive “attestation form” that will be analyzed by the two agencies. They will then provide a recommendation to the bankruptcy court regarding the discharge of any or all of the student loan debt.
In addition to providing a more thorough review and analysis than has previously been done, the new program won’t penalize those seeking discharge for things like having missed some payments in the past. One ED official says this helps lower the bar that “has become very difficult for deserving borrowers to clear.”
Program may be the only option after other federal attempts at help have stalled
The new program has been called a “game changer” and a “big step forward” by legal professionals who have studied it. It may be the only way for those with crippling student loan debt to get relief any time in the near future.
President Biden’s order to cancel some student loan debt for tens of millions of borrowers is fighting for life in the courts. A bipartisan bill introduced in the U.S. Senate (the FRESH START Through Bankruptcy Act) would allow borrowers to avoid the undue hardship period after ten years. However, even that is likely to have a difficult time making it through a highly divided Congress.
If you decided against bankruptcy because you didn’t think you could get the burden of your student loan debt off your shoulders, it’s a good idea to get more information about this new program. It’ also wise to seek sound legal guidance to help you navigate the process and improve your chances of success.