Breaking: 2024 Student Loan Bankruptcy Changes Offer New Hope for Struggling Queens Borrowers
For decades, student loan debt has been notoriously difficult to discharge in bankruptcy, leaving millions of borrowers trapped in a cycle of financial hardship. However, student loan bankruptcy law is changing in 2024, offering new opportunities for federal student loan borrowers and those with private loans. New reforms and proposed legislation aim to simplify the process, making it easier for struggling borrowers to discharge student loans.
Queens residents facing overwhelming student debt now have more options than ever before, thanks to significant policy changes implemented by the Biden administration and ongoing legislative efforts in Congress.
Revolutionary Changes in Student Loan Bankruptcy Policy
In the fall of 2022, the U.S. Department of Education and the U.S. Department of Justice jointly released updated bankruptcy guidelines aimed at making the process for student loan borrowers less arduous. These changes have already shown remarkable results.
The Biden administration’s updated policy now treats student loans more like other types of debt in bankruptcy court, experts say. Student loan borrowers can fill out a 15-page form, detailing their financial struggles and making their case for a mulligan.
The impact has been substantial. A total of 588 people filed cases seeking student debt discharges through bankruptcy between October 2023 and March — a 36% increase from the prior six-month period. As of March, a total of 1,220 new cases had been filed since the new federal guidance was put in place.
How the New Process Works
Under the previous system, borrowers needed to prove “undue hardship,” or a “certainty of hopelessness,” and government lawyers battled most of the requests. The new streamlined approach has dramatically changed this landscape.
The debtor may now complete and submit to the US Department of Education a 15-page ‘ATTESTATION IN SUPPORT OF REQUEST FOR STIPULATION CONCEDING DISCHARGEABILITY OF STUDENT LOANS’ form containing the debtor’s financial information. The Department of Education will review the information provided, using the new guidelines to determine what qualifies as “undue hardship”. If the information provided by the debtor meets the new “undue hardship” threshold, thereby justifying the discharge of that debt, the Department of Justice attorneys (who represent the Department of Education in Bankruptcy Court) can then recommend to the Bankruptcy Judge that the debtor’s federal student loan debt be discharged.
The results speak for themselves. The vast majority of borrowers seeking discharge have received full or partial discharges. In 99% of cases where courts have entered orders or judgments to date, the government recommended, and the court agreed to, a full discharge or partial discharge.
Additional Benefits for Chapter 13 Filers
Queens borrowers considering Chapter 13 bankruptcy have received additional good news. Effective July 1, 2024, a new Department of Education regulation substantially changes how income-driven repayment (IDR) plans are treated when a student loan borrower is a debtor in a chapter 13 bankruptcy case. Effective July 1, a new Department of Education rule provides new relief for how a student loan borrower’s income-driven repayment plan is treated if the borrower is in a chapter 13 bankruptcy.
This change allows borrowers in Chapter 13 cases to continue making progress toward loan forgiveness while their bankruptcy case is pending, rather than having their loans placed in administrative forbearance.
Legislative Momentum Building
Beyond administrative changes, Congress is considering several bills that could further expand student loan discharge options. H.R. 9931 – Student Borrower Bankruptcy Relief Act of 2024: Introduced in September 2024 by House Representatives Nadler and Correa, this comprehensive legislation would allow borrowers to discharge student loans through standard bankruptcy proceedings by eliminating the “undue hardship” requirement in Section 523 of the Bankruptcy Code. This would treat student loans like other common consumer debts, such as credit card balances, medical bills, and personal loans.
Additionally, the Private Student Loan Bankruptcy Fairness Act of 2023 modifies the treatment of certain student loans in bankruptcy. Specifically, it allows private student loans to be discharged in bankruptcy regardless of whether a debtor demonstrates undue hardship.
What Queens Borrowers Should Know
While these changes offer unprecedented opportunities for debt relief, borrowers in extreme financial distress may benefit from the more lenient rules, most people should try to avoid bankruptcy, experts say. Depending on the type of bankruptcy you pursue, that information can stay on your credit report for up to 10 years, making it a challenge to buy a house, apply for other types of loans and even to rent an apartment.
For Queens residents considering their options, it’s crucial to explore all available alternatives first. Federal student loan borrowers have several ways to reduce their debt burden, including income-based plans with $0 monthly payments and economic hardship and unemployment deferments. There are also loan relief opportunities for borrowers with disabilities and cancer.
However, for those who have exhausted other options and are facing genuine financial hardship, the new bankruptcy procedures offer real hope. As one Virginia attorney noted, “We have gotten forgiveness for a number of clients under the new bankruptcy changes. The discharge is life changing.”
Getting Professional Help in Queens
Given the complexity of both student loan law and bankruptcy proceedings, Queens borrowers should seek experienced legal counsel when considering their options. The changes in 2024 have created new opportunities, but navigating these procedures requires expertise in both areas of law.
For residents seeking experienced legal representation in Queens, consulting with a qualified bankruptcy queens attorney who understands these recent changes can be invaluable. The Law Office of Ronald D. Weiss, P.C. has been serving the Queens community for nearly 30 years, providing comprehensive debt solutions including bankruptcy representation under Chapters 7, 11, and 13.
Looking Ahead
Recent reforms, including new guidelines from the U.S. Department of Education, are making it easier for borrowers—particularly federal student loan borrowers—to seek relief. These changes could open the door for more struggling borrowers to use bankruptcy as a way to finally get out from under their debt by achieving a full or partial discharge of student loans.
While the political landscape continues to evolve, the current administrative changes represent the most significant shift in student loan bankruptcy policy in decades. For Queens borrowers struggling with overwhelming educational debt, 2024 has brought new possibilities for achieving the fresh financial start that bankruptcy is designed to provide.
The key is acting with proper legal guidance and understanding all available options. With the right approach and experienced representation, the burden of student loan debt that has trapped so many borrowers may finally be lifted.