As we look back at 2023 and observe the many bankruptcy proceedings we have completed here at Martin L. Rogalski, P.C. we’d like to share the improvements made to the process for discharging student loan debt through bankruptcy.
A bit of history: Federal involvement with student loans began with the GI Bill of 1944. Since then, the Federal government has increased its involvement with student loans issuance and payment with the National Defence Education Act of 1958 and the Higher Education Act of 1965. Today, the Federal government has near total control over student loans. Some 43 million outstanding loans exist. It is estimated that 1 in 6 Americans has some kind of a student loan.
Not all Debtors can repay their student loans. Discharging student loans through bankruptcy has previously required the Debtor seeking to discharge his debts to meet standards that were set very high by the bankruptcy courts.
In 2022, the Department of Justice set forth new guidelines regarding the discharge of student loans. The guidelines have a goal to make the discharge of student loans more informal, and less expensive, using a standardized form.
Here are the required steps: an Adversary Proceeding (lawsuit) must still be filed to start the process. After the lawsuit is filed, the Department of Justice will disclose all information on the Debtor’s student loan files. The lawsuit is then put on hold. A 15-page Attestation Form is completed by the Debtor. The form discloses the Debtor’s income, assets, living expenses and ability to pay now and in the future. After the form has been completed and submitted, the Assistant US Attorney will review the form and make a recommendation to the Department of Education as to what, if any, student loans should be discharged. A settlement proposal will then be made to the Debtor and if accepted is reduced to a judgment.
If a settlement cannot be reached with the government, the debtor can still pursue the lawsuit and request the court to grant a hardship discharge. The Department of Justice guidelines are an improvement over the previous process, in our opinion.
Like it or not, bankruptcy can provide a real solution out of debt from student loans or other debt. Martin L. Rogalski, P.C. has helped thousands of clients get back on track by filing bankruptcy. Please give us a call at 616-457-4410 or complete our contact form if you are in need of assistance.
