It is well known that Bankruptcy Code generally prohibits the discharge of student loans that are owed to or funded by a government agency or department. The Code provides an exception to the rule of non-dischargability: when the debtor can show that the debt, if not discharged, would cause the debtor, an “Undue Hardship”. Bankruptcy Courts across the country have come up with rules on how to determine what qualifies as an Undue Hardship. These rules make it extraordinarily difficult to discharge student loan debts. If the U.S. Department of Education opposes the discharge, only the most extreme examples of hardship are approved. And, it is widely known, that the U.S. Department of Education vigorously opposes all attempts to discharge student loans, regardless of the hardship and so the costs to litigate these cases can be beyond the means of most consumer debtors. Many consumer bankruptcy attorneys believe that, as a practical matter, it is virtually impossible to discharge a student loan. But, is there change in the wind?
The U.S. Department of Education recently announced that it is considering changing its internal policies regarding the discharge of student loans in bankruptcy. The department wrote that it wishes to enforce Congress’s rules that make student loans non-dischargeable, but it is reconsidering how it defines and determines what an “Undue Hardship” is, but they do not want debtors to be “inadvertently discouraged from filing an adversary proceeding in their bankruptcy case”.
In a surprise move, the Department announced that it is requesting public comment on the factors that is should consider when evaluating undue hardship claims in bankruptcy. See the Announcement in the Federal Register here: Request-for-information-on-undue-hardship-claims-in-bankruptcy-adversary-actions This is a golden opportunity for bankruptcy practitioners to effect needed change in the policies of the Department of Education and to make progress for debtors needing real relief.
If you are having difficulty with your student loan, Bredow Law PLC specializes in debt solutions and bankruptcies for consumers. We can help. When you are a Bredow Law client, our experience and skill allow us to give you the highest quality and most cost-effective bankruptcy representation. If you or someone you know has questions about bankruptcy, Contact Bredow Law at (248) 795-5516 or by email firstname.lastname@example.org