11 USC 523(a)(8) makes student loans non-dischargeable in bankruptcy unless excepting such debt from discharge would impose and undue hardship on the debtor or dependent.
There has been a trend in the last few years to relax the strict standard to establish what is undue hardship under the bankruptcy code but it is still extremely difficult to establish undue hardship under the current state of the law.
Recently, the Tenth Circuit joined the Fifth Circuit in holding that student loans are not “educational benefits” under section 523(a)(8) and allowed student loans that did not fit specifically into the categories under section 523(a)(8) to be discharged.
However, even if you want to challenge your student loans based on opinions in the Fifth & Tenth Circuits, it will still be very costly to have extensive litigation with the student loan company.
The most positive development in the law is that on September 29,2020, the House Judiciary Committee Passed H.R. 2648, the Student Borrower Bankruptcy Relief Act of 2019. In essence, when this is passed into law, student loans will be able to be discharged in bankruptcy. However, it is unlikely, that it will immediately become law with the election so close.
It is the author’s opinion that if you have substantial student loan debt, that it would not be advisable to file a chapter 7 now since once you file, it is very difficult to have a chapter 7 case dismissed unlike a chapter 13. The much better option is to file a chapter 13 bankruptcy to get the creditor off your back and to create an automatic stay. Also, presently section 523(a)(8) of the bankruptcy code prevents student loans from being discharged unless you can establish an undue hardship.
Hopefully, when the Student Borrower Bankruptcy Relief Act becomes law, then you can have your present chapter 13 case dismissed and refile a new chapter 7 or chapter 13 bankruptcy based on your individual circumstances.
The problem with delaying a bankruptcy filing is that one never knows how long passing H.R. 2648 can take since there are so many more pressing issues confronting our country, especially with the present coronavirus pandemic.
In addition, if you are getting overwhelmed with credit cards, personal loans, and other bills, you should definitely file bankruptcy now regardless of the issue with student loans. This virus is a horrible plague and we have all been impacted financially. However, eventually, your bills will have to be paid and it is better to deal with them now than by keep on delaying when you are in a crisis scenario.
The whole purpose of the bankruptcy code is to help honest debtors, who through unforeseen circumstances, have gotten into a horrible financial situation and they need a fresh start. What can be more of an unforeseen circumstance than this horrible plague that has hit the entire world?
Since the courts are now open in New Jersey and creditors are now pursuing their state law remedies to get paid on credit cards and other unsecured debts and mortgage companies are moving foreclosures to judgments, you do not want to delay.
Even though sheriff sales are still not being scheduled it is better to use the bankruptcy process to help you now before foreclosures get out of control.
Things are hard enough now and you don’t want creditors to pursue you as you get back to work.
If your debt is stressing you out and overwhelming you, we can help you get a fresh start by filing bankruptcy for you. For more information go to TaiebLaw.com or call us at 856-600-0819.
AGAIN, PLEASE NOTE WE ARE OPEN FOR BUSINESS TO HELP ANYBODY WHO IS IN FINANCIAL DISTRESS.
Steven N. Taieb, Esquire has been a south jersey bankruptcy attorney for 35 years and is board certified in consumer bankruptcy law by the American Board of Certification which is accredited by the American Bar Association.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.