Can I discharge student loans in bankruptcy?
We’ve got great news for you! Student-loan holders now have a new path to freeing their debt through bankruptcy! If you’ve been worrying about how you can pay off your debts, read on to know if this applies to you!
Oklahoma City Bankruptcy Attorney answers questions about the new ruling
In the past, discharging student loans was an almost impossible hurdle in bankruptcy. The Department of Justice vigorously fought against any lawsuits that targeted getting these types of debts discharged.
But on November 17, 2022, President Biden announced a significant change in how student loans will be treated. The goal is to make the process more consistent and fair. The Department of Justice attorneys will now evaluate each case against certain criteria to determine if a full or partial discharge is possible. The ultimate decision will still rest with the bankruptcy Judge.
We are excited about the prospect that this new announcement will allow us to help people escape their crushing student loan debt. In this article, we will answer these related questions:
- What do I need to know about discharging student loans in bankruptcy?
- What is the debt discharge process?
- What are the criteria to qualify for student debt wipe-off?
- Where can I find a student loan attorney that can help me?
If you want to eliminate your debt, our Oklahoma City bankruptcy attorney is here to help! Call our law office today to learn more!
What Do I Need to Know About Discharging Student Loans in Bankruptcy?
Here are the five points you need to note:
- There are criteria the Justice Department attorneys will consider before recommending the discharge of your debts.
- You have to complete a borrower-attestation form with your request.
- You must file a lawsuit against the Education Department in bankruptcy.
- You still need to file for bankruptcy to discharge your loans.
- This guidance only applies to federal student loans.
What Is the Debt Discharge Process?
In summary, here’s what happens after you submit all the relevant paperwork:
- The Department of Justice, together with the Education Department, reviews the available information.
- They will look at the factors relevant to your undue-hardship inquiry.
- Based on that assessment, they will determine whether to recommend that the bankruptcy judge discharge your debts.
Note that the Justice Department attorneys will only make the recommendations. Ultimately, the bankruptcy judge decides whether your debts can be discharged. However, this guideline does provide a clearer and fairer process for evaluating student debt.
What Criteria for Student Debt Wipe-Off Will the Department of Justice Consider?
The Justice Department provided a new process for student loan bankruptcy discharge cases. Before the Education and Justice departments recommend discharge, they will consider the following criteria:
Current Ability to Pay Student Loans.
Using existing standards developed by the IRS and the information you provide, the Justice Department attorney will calculate your expenses and compare those to your income. If the expenses equal or exceed your income, the Department will determine that the debtor lacks a present ability to pay.
Future Ability to Pay Debts.
The Department will then assess whether your inability to pay will persist in the future. The Department attorney will presume your financial circumstances are not likely to change if certain factors are present. These factors include
- Extended repayment status
- Lack of degree,
- Protracted unemployment history,
- Disability or chronic injury, or
- Retirement age.
Where such factors are not present, the Department attorney will assess the facts showing whether your current inability to pay is likely to persist.
Good Faith Efforts.
The Department will put an emphasis on objective standards that show your reasonable attempts to manage spending, earn income, and repay the loan when establishing what courts refer to as the “good faith” criterion. The Department attorney will consider whether the borrower contacted the Department of Education or their loan servicer to inquire about loan payment choices.
Where Do I Find a Student Loan Attorney?
You might be reluctant to retain counsel if you are heavily indebted from your college debts. After all, it will add to your already significant financial burdens. However, the expenses associated with forgoing legal counsel may outweigh the benefits of doing so. You will still be responsible for paying off your school loans if you cannot submit your petition.
Don’t let that happen to you. If you live in Oklahoma, our experienced Oklahoma City bankruptcy attorney at Scott Harris Law, PLLC can help you get a fresh start and experience relief from financial burdens.
Call our Oklahoma law firm today if you’re ready to take the first step at a secure financial future!