Posts made in January 2023

Justice Department announces new guidance for handling bankruptcy discharge of federal student loans

As part of its efforts to forgive federal student debt for certain borrowers, President Biden’s Justice Department recently announced new guidance for its attorneys to use when deciding whether to recommend that a bankruptcy judge discharge an individual’s federal student loans.

Previously, obtaining a discharge of a Debtor’s student loans through Bankruptcy was only possible in a very small percentage of cases because the standards for discharge were so difficult to meet.

However, the DOJ guidance has not only offered more clarity on how to meet the standards for a discharge, but has significantly loosened the standards for borrowers.

Under the Justice Department’s new guidance, Debtors will complete an “attestation form” and submit that for as part of a lawsuit that the Debtor files as part of his or her Bankruptcy case seeking the discharge of the loan. The Attestation will document whether certain criteria are met, such as having a present inability to repay the loan, having a future inability to repay the loan, and having made “good-faith efforts” towards repayment.

If these criteria are met, the Department of Justice will likely then recommend to the Bankruptcy Court either a full or partial discharge.

However, while the DOJ Guidance has provided much more clarity, it is highly recommended that you retain an attorney for the process of seeking a discharge of your student loans. This is the case because an attorney may best understand how you can meet the standards for a discharge, but can also help you navigate the process of filing the lawsuit seeking a discharge and negotiating with the Department of Justice to obtain its recommendation of a discharge to the Court.

Please contact us to discuss your options. You can also start the process by logging in to our Student Loan Toolbox and completing the information requested.