New DOJ Guidelines May Facilitate Student Loan Discharge
In conjunction with court-stalled efforts to forgive federal student debt for certain borrowers, President Joe Biden's U.S. Department of Justice recently announced a new set of guidelines for its attorneys to use when deciding whether to recommend that a bankruptcy judge discharge an individual's federal student loans.
The purpose of the guidelines is to streamline the process of discharging federal student debt which, unlike other consumer debt, such as credit cards, medical bills, etc., is not automatically discharged through bankruptcy.
Rather, under the U.S. Bankruptcy Code, a debtor seeking to discharge such loans has to prove undue hardship absent discharge, in separate action before the bankruptcy court. These complicated procedural steps, along with the stringent test adopted by most circuit courts for determining undue hardship, have long been criticized by consumer advocates as a significant barrier to those seeking discharge of their student debt.
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