How the DOJ Guidance Might Impact Student Loan Discharges in Bankruptcy

If you have student loan debt and you have been considering bankruptcy, you may already know that the U.S. Department of Justice (DOJ) recently issued new guidance concerning the discharge of student loan debt. Given that there has been a significant amount of discussion about amending the way that student loan debt is handled in bankruptcy cases, it is critical to understand that the new guidance does not change the overall process for discharging student loan debt in bankruptcy. To be clear, the requirement of proving an “undue hardship” still exists, but the DOJ has clarified some of the elements of the process and has made some changes to the way it will approach the issue of student loan debt.

Our Oak Park bankruptcy attorneys can provide you with more information about how the new guidance could impact student loan discharges in bankruptcy (including your student loan debt if you are considering bankruptcy).

Debtors Still Need to Prove an Undue Hardship

The new guidance does not change the fact that a debtor who files for bankruptcy and wants to have student loans discharged will need to prove an undue hardship. Under the U.S. Bankruptcy Code, student loans are excepted from discharge unless the debtor can prove that excepting the student debt “would impose an undue hardship on the debtor.” Courts generally use two different tests to determine whether the debtor can show that continuing to make payments on the debt would be an undue hardship: the Brunner test and a totality of the circumstances test. For most debtors in Oak Park, the Brunner test will apply.

Reduction of Burdens Associated With Adversary Proceeding

While debtors will still have to prove an undue hardship, one of the ways the guidance will help debtors is that it will reduce burdens associated with the adversary proceeding. To have student loans discharged in bankruptcy, a debtor has to file an adversary proceeding and previously had to go through a complex discovery process. Now, the guidance will result in debtors filing an attestation form and the government receiving information about student debt from the lender.

Government Stipulation to Facts Demonstrating That Continued Payment of Student Loans Would Constitute an Undue Hardship

The new guidance also says that DOJ attorneys should stipulate to facts that prove continuing to pay student loan debt would create an undue hardship, and should recommend that the bankruptcy court discharge student loan debt. Both the DOJ and the Department of Education will be responsible for taking steps to make the process more streamlined for debtors, and for making it easier for eligible debtors to have their student loan debt discharged when they file for consumer bankruptcy.

Contact an Oak Park Bankruptcy Attorney Today

Do you have questions about the new guidance and how it could impact your ability to discharge student loans in your bankruptcy case? Or do you have general questions about bankruptcy discharges and student loan debt? One of the experienced Oak Park bankruptcy lawyers at our firm can assist you. Do not hesitate to get in touch with our firm to learn more about how we can help you with your bankruptcy case. Contact the Emerson Law Firm today.



See Related Blog Posts:

Benefits You Receive and Your Consumer Bankruptcy Case

How Much Debt is Enough to File for Bankruptcy?

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