Justice Department Announces New Approach to Bankruptcy and Student Loans

If you currently have student loan debt and you are considering the possibility of consumer bankruptcy, you should know that the U.S. Department of Justice (DOJ) recently announced a new process for discharging student loans. According to an article in The New York Times, working with the U.S. Department of Education (DOE), the DOJ “announced a new process that it said would help ensure that people in bankruptcy seeking relief on their federal student loans were treated more fairly, with clearer guidelines about what types of cases would result in a discharge.”

Does this shift mean that more bankruptcy discharges will involve student loans, and more consumers with student debt will be able to wipe out that debt in Chapter 7 bankruptcy cases? It might, but it will depend on how many current student loan borrowers are actually eligible to have their student debt discharged under the existing bankruptcy system. Our Oak Park bankruptcy attorneys can say more.

New Approach Will Provide Clarity About the Likelihood of Discharging Student Loans in Bankruptcy

The new approach to student loans and the consumer bankruptcy process will revolve around more clarity and transparency and give debtors a better sense of whether their student loans will likely be discharged in their bankruptcy case. According to the article in The New York Times, the process will “allow Justice Department attorneys to more easily identify cases in which [they] can recommend discharge of a borrower’s student loans.” How will that process work?

Debtors who are filing for bankruptcy will fill out something known as an attestation form, which will then be used by the DOJ to “help determine whether to recommend a discharge.” When debtors can show that they have expenses that currently exceed their income, lawyers through the DOJ or the DOE “will recommend a full or partial discharge,” according to The New York Times.

Process Could Encourage More Debtors to Try to Discharge Student Loans

While this guidance does not necessarily change the requirements for having student loans discharged in a bankruptcy case, some commentators believe that it will make it more likely that debtors will try to discharge their student loans in a personal bankruptcy case. Indeed, as the article underscores, one of the reasons that so few bankruptcy cases involve the discharge of student loans is that debtors do not attempt to have their student loans discharged due to the complexity involved in the process.

The new guidance, the article highlights, “should increase the number of student discharge requests while also making it cheaper and easier to litigate those requests.”

Contact an Oak Park Bankruptcy Lawyer Today

If you are struggling with debt and have general questions about your eligibility for bankruptcy, or if you want to learn more about the possibility of having your student debt discharged in a bankruptcy case, an experienced Oak Park bankruptcy lawyer can help you. Do not hesitate to reach out to our firm to learn more about how we assist consumers with debt collection and bankruptcy cases in the Chicago area. Contact the Emerson Law Firm today to learn more about personal bankruptcy in Illinois and how our attorneys can help.



See Related Blog Posts:

Bankruptcy Around the Holidays: What Should I Consider?

Debt Collectors and Debts Discharged in Bankruptcy: Five Things to Know

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