Are We Finally Able to get Rid of Student Loan Debts?

Is there finally a path to take to get rid of student loan debt? In theory, yes. On November 17, 2022, the U.S. Department of Justice and Department of Education announced new guidance regarding how and when the federal government will agree to discharge federal student loans in bankruptcy. This Guidance represents one of the most seismic changes in consumer bankruptcy practice since the enactment of BAPCPA in 2005. With student loans representing the second largest source of consumer debt in the U.S. the impact of the Guidance will be far-reaching for millions of distressed debtors who will now have a clearer path and increased likelihood to successfully discharge their federal student loans in bankruptcy.

To date, attempts by debtors to meet the -undue hardship test have largely been Ineffective and expensive.? As a result, many realistically but also mistakenly assume that student loans simply are not dischargeable In bankruptcy.

The Guidance seeks to change that by providing the objective standards through which the DOE and DOJ will review a debtor's case-safe harbors of sorts. If the debtor can demonstrate the existence of these facts and circumstances, then the DOJ and DOE will stipulate that the student loans should be discharged.

Having said that, the Guidance is still new and untested so navigating student loan discharges may not be smooth sailing yet, but it appears to have provided a beacon of light on the horizon. Stay tuned as we continue to fight for those whose student loans are preventing them from living a productive and debt free life.