Financial problems can be adversarial; one minute, you are trying to keep up with monthly debt repayments the next, you declare bankruptcy. Although it is a harsh reality for some people, their end with student debt remains far from over. For the longest time, walking away from student debt, even when you hit rock bottom, has only a 0.1 %success rate, but that is about to change thanks to the Biden administration. In mid-November, an announcement established guidelines that would help debtors discharge their student debt during bankruptcy.
Forgiveness Plan On Hold
The announcement comes as the White House is battling the legal challenges that have put the infamous student loan forgiveness plan on pause. The announced student plan received mixed reactions, and it only took critics a few weeks to attempt to block it.
After a district judge ruled against the GOP states due to lack of legal standing, the states moved to appeal the case. In November, however, the court of appeals put the student loan forgiveness plan on hold, after which the Department of Education halted applications although 26 million applicants had already made submissions.
What Is In The Amended Policy?
Unlike before, when the process was costly and stressful for borrowers, the new rules hope to make it easier for borrowers facing undue hardship to be able to dispel their student debt in bankruptcy. The court will still have to review the borrower’s financial history and situation to confirm they are facing undue hardship. Once approved, the debtor should be able to walk away from their student debt when declaring bankruptcy.
Bottom Line
This new policy by the Biden administration could offer debtors a new safety valve from heavy debt. Rather than an avalanche of blockages that debtors had to deal with before, they can now file for a discharge of the student loan with new hope that the court will grant it.