Student Loan Relief From President Biden and Bankruptcy

As part of the Biden administration's efforts to assist individuals and families impacted by COVID-19, it has proposed the forgiveness of upto $10,000 in student loan debt for borrowers.  The cost of this proposal is about $350 billion, but it could help struggling borrowers with their debts as they attempt to recover from the loss of job-related income.

Student Loan Debt Is Not Dischargeable

Those who have considered filing Bankruptcy have been quick to learn that student loan debt is not dischargeable, thanks to Federal protections that have been designed to prevent borrowers from getting out from under the crippling cost of attending college.  There are very limited circumstances under which student loans can be discharged but, statistics show that, for those willing to go through the expense of bringing the necessary adversary proceeding, only 0.4% of them are successful.  Attempting to discharge student loan debt requires the commencement of an adversary proceeding against the lender, which is commenced after the filing of the bankruptcy petition.  The lender ALWAYS opposes this proceeding, and as a result, full-blown litigation is required.  The borrower must show a significant economic hardship that is not likely to be alleviated as well as the condition that, should the borrower be required to continue paying the debt, that they would be unable to meet minimum living standards.  To be successful, the debtor is required to spend thousands of dollars in legal fees and court costs to prove, essentially, that they can't afford it.  See the problem?  That's why so few proceedings are filed, and even fewer are successful.

Student Debt Forgiveness Proposed May Still Mean Bankruptcy

The forgiveness proposed might help some borrowers in the short term, but, if you're a borrower still left with significant student loan debt, and continue to owe money to credit cards, personal loans, or anything like that, then you may still be looking at a bankruptcy filing in your future.

Consider your overall debt load, your monthly budget, and your cash flow.  If you are falling behind, have already fallen behind, or feel you are about to, then getting rid of those debts that are not student loans may help you better manage the payment of the remainder of your student loans.

Filing a Chapter 7 Bankruptcy, or in some cases a Chapter 13 Bankruptcy, maybe the help you need to get out from under. 

Ted Alatsas
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Trusted Brooklyn, New York Family Law Attorney helping NY residents with Elder Law and Asset Protection
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