New Guidelines on Student Loan Bankruptcy Discharge

New Guidelines on Student Loan Bankruptcy Discharge

In November 2022, the Biden administration revealed policy changes that aim to simplify the process of eliminating federal student loans for federal student loan borrowers through bankruptcy. 

Through the Department of Justice and Department of Education, the federal government’s new guidelines are designed to encourage the discharge of federal student loans. 

“This is huge! Because currently, every time a student loan borrower files bankruptcy and then files an adversary proceeding to attempt to discharge the debts, the federal government opposes these efforts,” says Attorney James Schwitalla of The Bankruptcy Law Offices of James Schwitalla, P.A.  “However, under the new guidelines, the federal government is actually trying to facilitate the process of discharging the student loans and help the student loan borrowers get rid of them!”

To understand what these new directives mean for student loan borrowers, let’s discuss how the previous guidelines made student loan discharge difficult. 

Discharging Student Loans in Bankruptcy Challenging


While it’s possible to discharge private student loans in bankruptcy, student loan borrowers often encounter difficulties during the process.

The U.S. Bankruptcy Code requires a student loan borrower to prove that they are subject to an “undue hardship” if their student loans are not discharged. The courts have interpreted this to mean that the student loan borrower has to prove three things:

  1. That they’ve made a good faith effort to repay the loans
  2. That they cannot repay the loans while still maintaining a minimal standard of living for themselves and their dependents; and
  3. That this inability to pay will persist for most of the remaining repayment period of the loan.

New Guidance to Address Student Loan Bankruptcy Cases

According to Attorney Schwitalla, the new guidelines outline how the federal government should respond when a student loan borrower files for bankruptcy and then files an adversary proceeding to attempt to wipe out their student loans. 

Upon filing the adversary proceeding, the government will consider the student loan borrower’s situation as set forth in the adversary complaint to determine whether they will agree to, or oppose, the attempt to discharge the federal student loan.

With this new process, student loan borrowers will have a stronger chance to clear their student loan debt without having to litigate their adversary proceeding beyond the filing of the complaint. In some cases, Justice Department attorneys will agree that the facts of the case demonstrate “undue hardship” and that the student loan should be discharged.

As attorney Schwitalla stated, “The student loan borrower is going to know in advance whether or not the federal government is going to oppose their attempt to discharge the debts.” 

Get More Student Loan Bankruptcy Options with The Bankruptcy Law Offices of James Schwitalla, P.A.

If you are a federal student loan borrower struggling to pay your loans while maintaining a decent life for yourself and your dependents, you need student loan bankruptcy advice. Don’t hesitate! Contact The Bankruptcy Law Offices of James Schwitalla, P.A., now! We will provide you with a comprehensive analysis of your current financial situation and legal options and explain to you your options in a way that you will understand. The consultation is not over until all your questions have been answered!

Schedule an appointment today.

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