Understanding the New Student Loan Bankruptcy Discharge Guidelines

• The federal government’s updated bankruptcy student loan relief policy uses a more consistent approach to evaluating undue hardship claims.
• These changes may give you a better chance at securing a full or partial discharge during the adversary proceeding.
• Strong legal guidance from a trusted firm like OakTree Law matters more than ever in presenting a clear, well-supported case for discharge.

If you’re struggling with student loan debt, it’s important to know that there have been recent changes in federal student loan bankruptcy guidance. In some cases, these new student loan bankruptcy rules make it easier for you to move through the hardship certification process and get relief from the burden of your loan.

Here’s what you need to know about these revised student loan bankruptcy discharge guidelines.

What Has Changed in the Government’s Student Loan Hardship Discharge Policy?

First, what hasn’t changed: Debtors undertaking the student loan discharge process through bankruptcy must still prove undue hardship in a separate adversary proceeding.

However, the U.S. Department of Justice (DOJ) has recognized in its new student loan bankruptcy discharge guidelines that this process “need not be an insurmountable barrier.” They are now attempting to ensure transparent and consistent expectations.

With the new federal guidance for student loan bankruptcy discharge, the DOJ will:

• Evaluate cases using a standardized framework.
• Recommend discharge when the facts support hardship.

The government has created a less adversarial path to bankruptcy discharge with this revised federal student loan discharge program.

The Process

Under the new student loan bankruptcy discharge guidelines, at the outset of the adversary proceeding, debtors complete an attestation form to outline their circumstances. In consultation with the Department of Education, the DOJ reviews the information and determines if it will oppose or recommend discharge.

Federal Bankruptcy Student Loan Rules and Undue Hardship

Not everything about the student loan bankruptcy discharge guidelines has changed. Debtors must still prove undue hardship during the adversary proceeding. That means demonstrating:

1. You are unable to maintain a minimal standard of living while repaying your loan.
2. This hardship is likely to continue.
3. You have made a good-faith effort to repay your loan.

What’s Different?

Previously, the DOJ would often take a very hard line on accepting claims of undue hardship. They were more likely to challenge a borrower’s long-term financial outlook and to argue that not all repayment options had been exhausted.

Under the new student loan bankruptcy discharge guidelines, DOJ attorneys are encouraged to evaluate undue hardship more consistently. Instead of the subjective approach often taken in the past, there is now a standardized evaluation process in place that is more objective.

How Does The New Federal Student Loan Bankruptcy Guidance Change Outcomes?

Even under the new student loan bankruptcy rules, judges continue to make the final decision regarding discharge. What’s different is how the DOJ presents its side of the case. Now, rather than taking a strictly defensive approach, attorneys for the government may recommend discharge when the facts support it.

Partial Discharge

In another significant shift in student loan hardship discharge policy, the DOJ may support a partial discharge. The new student loan bankruptcy discharge guidelines permit government attorneys to recommend more flexible outcomes.

The Bottom Line

If the DOJ supports full or partial discharge of your student loans, there is more room to negotiate a practical outcome without a lengthy court process. It can also impact the judge’s ruling on your adversary procedure.

Are Private Loans Affected by These Bankruptcy Policy Changes to Student Loans?

When your loan is funded privately, it is not impacted by the new Department of Justice student loan guidance. Creditors may still aggressively contest the discharge of your loan. Although there may be other circumstances that permit discharge without the proof of undue hardship, in their absence, you must still fully prove your case.

Why You Need Legal Guidance

While the changes to student loan bankruptcy discharge guidelines impact how the DOJ evaluates your circumstances, much of your success still lies in effectively presenting your case.

To take full advantage of the updated government guidance regarding undue hardship for student loans, the evidence you present to the DOJ must be crafted clearly and compellingly. That’s where the help of a skilled bankruptcy professional is invaluable.

An experienced debt attorney ensures that your bankruptcy filing, your adversary proceeding, and your DOJ attestation are aligned in content and that your entire case is strong and persuasive.

Lean on OakTree Law

At OakTree Law, our attorneys understand the nuances of the revised student loan bankruptcy discharge guidelines. We are here to help you take advantage of this beneficial federal student loan bankruptcy guidance and to build the strongest possible case for discharge.

Don’t leave your financial freedom to chance. Schedule your FREE bankruptcy evaluation with OakTree Law today.