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What Should I Know About Filing Bankruptcy for My Student Loans?

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If you took out loans to attend a college or university, you know paying those loans off can feel like a weight on your shoulders. The monthly payments and interest rates can make it challenging to lower the total amount. However, the Biden Administration just announced new bankruptcy guidelines to provide those struggling with debt an easier way to discharge the payments. If you’re interested in seeking relief, you can contact a New City, New York Bankruptcy Attorney to discuss your options.

What Are the Changes in Filing for Bankruptcy for Student Loans?

In previous years, filing for bankruptcy for student loans was often thought of as futile, as the success rate was astronomically low. This is due to the fact that the courts needed proof that these loans were putting “undue hardship” on borrowers in order to be forgiven. However, the term was never expanded upon, meaning it was vague and hard to prove borrowers were experiencing extreme difficulty.

Instead, the new policy creates more tangible guidelines for discharging student debt. This allows the courts more flexibility in ruling whether or not forgiving the debt would be a good idea.

How Do I Know if I Qualify?

The new policy allows the Justice Department’s attorneys to recommend the discharge of student loan debt under more concrete circumstances. This makes it easier for those experiencing student loan debt to discharge payments.

Some primary examples of when your debt could be discharged under bankruptcy include if your expenses meet or exceed your income in conjunction with other circumstances. For example, if you have a chronic disability, have been making payments for the past ten years, or did not earn a college degree, it may be recommended that you file for bankruptcy. Similarly, if you’ve made an effort to earn income and meet payments, you will be considered a “good-faith borrower.”

Do I Need a Lawyer?

If you think you could qualify to prove undue hardship as a result of your student loans under the new policy, you may be under the assumption filing for bankruptcy is a simple process. However, speaking with an attorney is essential, as the process is considered legal as opposed to financial.

Similarly, there are different kinds of bankruptcy you can file, and student loans are not treated like standard debt. Instead, a professional attorney can sit down and discuss your options, helping you decide the best course of action. Our Rockland County bankruptcy attorneys are ready to help you explore your choices.

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