U.S. Department of Education to Reconsider Bankruptcy Rules

As many Oklahoma residents who are struggling with student debt know, it can be extremely difficult to have student loan debt discharged through Chapter 7 bankruptcy. In recent years, consumer protection groups have been advocating for a change to the bankruptcy rules so that student loans can become eligible for discharge through personal bankruptcy. According to a recent article in Inside Higher Ed, the U.S. Department of Education (DOE) recently indicated that “it is interested in tweaking the standards used for determining whether student loan debt can be discharged in bankruptcy.”

What should consumers in Oklahoma know about potential changes to bankruptcy rules? And how can an Oklahoma bankruptcy attorney help?

Revisiting the “Undue Hardship” Requirement

As many Oklahoma residents with student loan debt know, in order to be eligible to have your student loan discharged in a consumer bankruptcy proceeding, you need to be able to show that continuing to pay back the loans would constitute an “undue hardship.” Given that Congress “has never defined what undue hardship means and didn’t delegate to the department [the DOE] the ability to do so,” the task largely has been left up to bankruptcy courts to establish a standard for undue hardship.

For most debtors who wish to discharge student loans in bankruptcy, the practice of succeeding is “notoriously difficult,” according to the article. Now that the DOE is seeking public comments for determining undue hardship, the requirement could become less stringent and could allow more student loan borrowers to have those debts discharged.

Potential for Bipartisan Cooperation

In addition to making the bankruptcy process easier on student borrowers, a shift in the DOE’s understanding of the undue hardship requirement could also lead to bipartisan cooperation. Senators such as Elizabeth Warren have been working to “loosen bankruptcy law so student borrowers can discharge their debt,” and this signaling from the DOE could represent the first step.

Up until now, there has been little bipartisan cooperation over consumer advocacy issues, including the growing national student loan debt amount.

Seek Advice from an Experienced Oklahoma Bankruptcy Attorney

Many consumers have questions about the relationship between student loan debt and personal bankruptcy. If you have questions about whether your student loan debt may be eligible for discharge in a Chapter 7 bankruptcy, you should discuss your case with an Oklahoma bankruptcy lawyer as soon as possible. Contact the law office of Deborah Brooks & Associates, P.C. to learn more about how we can help with your situation.