Generally, student loans are considered non-dischargeable in bankruptcy. Under § 523(a)(8) certain student loans may not be discharged in bankruptcy unless the bankruptcy court determines that payment of the loan “would impose an undue hardship on the debtor and the debtor’s dependents.” This inquiry is undertaken through a formal adversary proceeding and a finding of undue hardship is difficult to establish.
New Guidance for Student Loan Discharge
The Department of Justice recently published new guidance for debtors in bankruptcy seeking to discharge their student loans. The Guidance provides a simplified procedure for debtors to obtain a recommendation from the DOJ on whether their student loans qualify for discharge. Under the new procedure, debtors will submit an Attestation form that includes things like income, expenses, loan repayment history, and many other disclosures. After reviewing the Attestation and other documents, the DOJ will stipulate to certain facts and provide a recommendation to the bankruptcy court on whether debtors qualify for student loan discharge.
The Attestation is quite extensive and is probably not worth the cost and effort for most bankruptcy debtors (even those with significant student loan debt). Additionally, the form is filed with the DOJ after filing a formal adversary proceeding in the bankruptcy court which is a costly and risky endeavor. The new Guidance may simplify the fact-finding process in an adversary proceeding, but it is unlikely to substantially expand the number of debtors who qualify for discharge.
Contact WM Law
If you have questions about whether you might qualify for student loan discharge, you should speak with an experienced bankruptcy attorney to discuss your options. At WM Law, we are here to help.
written by Ryan Graham