Can Student Loan Be Discharged In Bankruptcy

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Bruner Wright, P.A. is a bankruptcy and corporate law firm that puts its clients first. We focus on the legal representation of companies and private individuals in bankruptcies and business processes. We also have experience with estate planning and inheritance law matters. Our firm has extensive experience in these practice areas and provides our clients with much-needed peace of mind in turbulent times.

Can Student Loan Be Discharged In Bankruptcy

At Bruner Wright, PA, our Florida bankruptcy attorneys have been protecting the rights of individuals and businesses in bankruptcy cases for more than 30 years. We understand the importance of answering your legal questions.

What Happens To Student Loan Debt When You File Bankruptcy?

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Bruner Wright P.A. is the top bankruptcy attorney in Tallahassee, Florida. We also provide comprehensive business litigation services to small and medium-sized businesses throughout the North Florida region. We provide assistance with commercial and real estate procedures. Our firm can essentially be an in-house attorney for companies that do not have an in-house legal team. We also work with business owners and other community members to create estate planning arrangements, including business succession planning. Contact us today to learn more about the best bankruptcy attorney in Jacksonville and Tallahassee. CHARLOTTE, NC. The Biden administration announced earlier this month that the remaining federal student loans of more than 80,000 student loan borrowers will be forgiven.

But what does this mean for non-compliant borrowers? If they file for bankruptcy, will their loans be forgiven?

According to studentaid.gov, federal student loans can be discharged in bankruptcy court if you can prove that paying those loans would cause unnecessary hardship.

Student Loan Debt In Bankruptcy

To qualify, she said, you have to prove to the court that you have such a minimum income that you can’t afford those student loans.

“This becomes problematic because with federal student loans you can qualify for income-driven repayment programs based on your income and monthly living expenses, so the IDR can be as low as zero and $0 per month.

Sheek said filing for Chapter 7 or 13 bankruptcy alone won’t automatically eliminate student loan debt, but it can be a way to keep your head above water.

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Discharging Student Loans In Bankruptcy

“Filing Chapter 7 to pay off credit card debt, or past foreclosures, past evictions, medical debt, usually puts people on track to deal with student loan debt afterward.”

So what can you do if you are in debt? Sheek said to contact a bankruptcy attorney to discuss all your options.

“Look at income-related repayment. If there are other debts that they are dealing with besides student loans, such as credit card debt, medical debt, the attorney calls, then we can look at paying off that debt. at least they could keep their heads above water a little,” says Sheek.

The Department of Education’s Office of Federal Student Aid offers several student loan programs. Click here to see if you qualify.

New Guidelines Make It Easier To Discharge Student Loans In Bankruptcy

VERIFY aims to help the public distinguish between real and false information. The VERIFY team uses audience questions to track the spread of stories or claims that need clarification or correction. Do you have something you want to CHECK? Text us at 704-329-3600 or visit VERIFY. A growing number of student loan borrowers in dire financial straits are paying off their debts through bankruptcy, a feat that was nearly impossible until the Biden administration changed the rules last year.

In the first 10 months since the new bankruptcy process was introduced last November, 99 percent of borrowers who used it had at least some of their student loans forgiven, the Department of Education said Thursday. Although only 632 people took advantage of the new process – a small number compared to the number of bankruptcy filers in 2022 – Department of Education officials expect that number to rise significantly as more lawyers, both inside and outside the government, discover the new guidelines . are trained.

Bankruptcy courts have treated student loan debt differently than other types of debt since the 1970s. In the 1980s, lawmakers in Congress feared that highly educated and wealthy professionals would abuse the system. Debtors who default on their student loans must take the extra step of suing the government to prove that their student loans are causing “undue hardship.”

Proving undue hardship is so expensive and difficult that just over one in a thousand people with student loans who file for bankruptcy actually pay off their student loans, according to a 2020 study by a Villanova law professor.

Private Student Loans Can Now Be Discharged In Bankruptcy, But Consider The Alternatives First

The new procedure, which was implemented by the Ministry of Justice last November, standardizes and simplifies the process. Debtors filing for bankruptcy can now apply for student loan forgiveness by completing a 15-page form. Government attorneys are evaluating the forms with new guidelines on what qualifies as “undue hardship.”

“It is clear that this improved process will help distressed borrowers,” Rich Cordray, head of the Federal Student Aid Office, said in a statement. “Working with the Department of Justice, we will continue to work to streamline this process and provide a path for student loan borrowers to obtain much-needed bankruptcy relief.”

Bankruptcy is still not a painless solution to financial problems, student loans or otherwise: your assets can be foreclosed upon in bankruptcy and your credit will be lowered for years. However, it can provide a fresh start for people who don’t have better options, especially now that paying off student loans is a real possibility.

The bankruptcy reforms were part of a series of changes to the federal financial aid system introduced last year that were intended to ease the financial burden on borrowers when the freeze on interest rates and required payments ended in October the pandemic era.

Student Loan Borrowers Get Debt Discharged Through Bankruptcy

Requires writers to use primary sources to support their work. These include white papers, government data, initial reports and interviews with industry experts. Where appropriate, we also cite original research from other reputable publishers. Learn more about the standards we adhere to in creating accurate, unbiased content in our Editorial Policy. Yes. If you qualify, you may be able to have certain federal student loans discharged under Chapter 7 or Chapter 13 bankruptcy. After you file for bankruptcy, you’ll need to take an additional step to charge your debt. The Ministry of Justice guidance from November 2022 has streamlined and simplified this process. It is now possible for most applicants with federal student debt to do this themselves without hiring an attorney to help. To meet the new guidelines, your loans must be federal direct loans or direct consolidation loans issued by the Department of Education. You must also be able to demonstrate that you are unable to make the payments, but that you have made good faith efforts to do so in recent years.

There has long been a myth that you can’t get rid of your student loans with bankruptcy. This myth persists in part because most student loan borrowers who may qualify for bankruptcy discharge don’t even try.

The bankruptcy process itself requires many forms, documentation gathering, and patience. And to get rid of your student debt, you have to take an extra step: start a counterclaim procedure. In the past, this process was so complicated and intimidating for many people because it involved a separate hearing, that most applicants chose to hire an attorney to complete it successfully.

In November 2022, the Department of Justice and the Department of Education issued new guidelines to make the adversary process easier and less intimidating. The guidelines also provide courts with clarity on how applicants can demonstrate ‘undue hardship’. While we are still seeing what the impact of the new guidelines will be, there are some early indications that it will make it easier to recover from federal student loan bankruptcy.

Student Loans In Bankruptcy

If you meet the requirements, bankruptcy may be a viable solution for some or all of your debts

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