Department of Justice and Department of Education Released New Guidance for Stipulating to the Discharge of Federal Student Loans in Bankruptcy
NACBA (National Association of Consumer Bankruptcy Attorneys) reports that in November of 2022, the Department of Justice and Department of Education released new guidance for stipulating to the discharge of federal student loans in bankruptcy. These new guidelines direct DOJ attorneys to stipulate to the facts demonstrating that a debt would impose an undue hardship and recommend to the court that a debtor’s student loans be discharged under certain circumstances under a much less draconian standard and on a much more predictable basis.
Comment of The Bankruptcy Law Firm, PC on 3/5/23: Attorneys who predict what the US Supreme Court will rule, are predicting that the US Supreme Court will rule that President Biden lacked the power to–by issuing an Executive Order–decree that $400 plus billions of dollars of student loan debt would be forgiven, and will rule that the US Congress would have to pass a law ordering this. It appears unlikely that the present US Congress would pass such a law.
If the US Supreme Court so rules, then attempts to discharge student loan debt will continue to be governed by Bankruptcy law, and the above November 2022 new guidelines will (supposedly) help more bankruptcy debtors who owe student loan debt to be able to discharge their student loan debt (or some of it) in bankruptcy.
At present, per Bankruptcy Code 11 USC 523(a)(8),a bankruptcy debtor can only seek to discharge the debtor’s student loan debt in bankruptcy, if the debtor proves it would be an undue hardship on debtor/debtor’s dependents, if the debtor had to pay that student loan debt back over the debtor’s whole working life.