Student Loan Debt Forgiveness: Is Bankruptcy an Option?

Photograph of a figurine of unhappy female graduate in cap and gown buried under stacks of U.S. paper currency, suggesting the idea of the crushing student loans with looming possibility of filing for bankruptcy

Any debt relief is good relief for those who owe on their student loans, including forgiveness programs and bankruptcy. Federal student loan payments were paused starting in March 2020, and years later, the U.S. Department of Education announced that (most) borrowers had to resume payments as of October 2023.

Though the decision to continue student loan payments was disappointing for borrowers across the country, that doesn’t mean it’s time to despair. Historically, student loans have been considered non-dischargeable through bankruptcy. However, thanks to the Department of Education’s recent policy changes student loan discharge is more accessible through bankruptcy than ever before. 

If you’re in this situation, there’s still some hope. Many people are unaware that there are several different ways they can achieve student loan forgiveness. In these complex times, you may find yourself in need of a student loan legal counsel from OlsenDaines to help you navigate through the red tape and explain all of your options to you. At the very least, we can give you a better idea of the options, including filing for bankruptcy.

Am I Eligible for Student Loan Forgiveness Programs?

Eligibility for student loan forgiveness programs can vary depending on factors such as your profession, income, loan type, and repayment history. Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, and Income-Driven Repayment (IDR) plans are just a few examples of the options out there. 

Public Service Loan Forgiveness

To provide relief for full-time employees of government services or non-profit organizations, the federal government also offers Public Service Loan Forgiveness (PSLF). This allows the student loans to be forgiven after 120 qualifying payments, or just ten years while working for a qualifying public service organization. Some examples of qualifying employers include:

  • Military Service
  • Public Health
  • Public Education
  • Social work
  • Early Childhood Education
  • 501(c)(3) Tax-Exempt Organizations

It’s important to note that the 120 payments do not need to be consecutive, but you must fill out paperwork to delineate which payments contribute toward your forgiveness plan. Additionally, not all employers qualify for PSLF. 

What Is an Income-Driven Repayment Plan (IDR)?

Income-driven repayment (IDR) plans are designed to help individuals who have student loan payments that are disproportionately high compared to their income. These plans calculate your required payments based on how much you earn annually rather than how much you owe. As a result, your payments could be lower and much more affordable than standard repayment options. 

Income-driven repayment plans (IDRs) use your family size and discretionary income to determine an appropriate monthly payment amount. For many people, the IDR can significantly lower monthly payment amounts. IDR plans offer complete loan cancellation after making a certain number of qualifying payments — typically over the course of 20 or 25 years. 

Borrowers may qualify for one of these types of IDR plans:

Repayment Plan % of Discretionary Income Repayment Period
Saving on a Valuable Education (SAVE) Plan 10% 20 years (for only undergraduate loans)
25 years (if you have any graduate or professional loans)
Pay As You Earn (PAYE) 10% 20 years
Income-Based Repayment (IBR) Plan (first borrowed after July 1, 2014) 10% 20 years
Income-Based Repayment (IBR) Plan (borrowed before July 1, 2014) 10% 25 years
Income-Contingent Repayment (ICR) 10% 25 years

The main differences between these plans are the percentage of your discretionary income required in each monthly payment and the amount of time you must make payments before qualifying for forgiveness. 

Saving on a Valuable Education (SAVE) Plan

In addition to the IDR plans above, the Biden Administration has also announced a new plan called the Saving on a Valuable Education (SAVE) plan. This plan has the lowest monthly payment of any available repayment option and offers a number of other benefits to make the debt more manageable. SAVE is rolling out in the summer of 2023 and will go into full effect in July 2024.

Do FFELP Loans Qualify?

Not exactly. Though Federal Family Education Loan Program (FFELP) loans can benefit from these updates to student loan forgiveness, borrowers must apply to consolidate any commercially held loans into a Direct Consolidation Loan to qualify. 

FFELP student loans are privately owned but federally backed. Most loans taken out prior to 2010 are FFELP loans, though your service provider can help you determine which type of loan you have if you aren’t certain.

To truly understand if you qualify for any of these programs, it’s highly recommended that you consult with a knowledgeable student loan lawyer at OlsenDaines. We can assess your unique situation and guide you toward the best course of action.

Filing for Bankruptcy with Student Loans

When student loan debt is crushing your financial plans, you might consider filing for bankruptcy. Chapter 7 and Chapter 13 are the two most common types of bankruptcy for student loan debt.

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” allows for the discharge of most unsecured debts, giving you a fresh financial start. However, student loan debt is notably difficult to discharge under Chapter 7. To have student loans discharged, borrowers must prove “undue hardship,” a stringent standard requiring them to demonstrate that repaying the loans would impose an extreme financial burden. 

Unfortunately, there is no strict definition of undue hardship. The Department of Education has established a list of guidelines that can help determine whether a borrower qualifies. Some examples of factors that can contribute to ‘undue hardship’ include:

  • If the borrower has a disability.
  • If the borrower made a good-faith effort to repay the loans.
  • If the borrower’s income is below the poverty line for their state.

Chapter 13 bankruptcy, also known as “reorganization bankruptcy,” allows you to restructure your debts into a manageable repayment plan over three to five years. While Chapter 13 does not discharge student loan debt, it offers significant relief by halting collection actions and allowing for the inclusion of student loan payments in the repayment plan. This can provide borrowers with temporary relief from high monthly payments and additional time to improve their financial situation. 

After completing the Chapter 13 plan, you must continue to repay any remaining student loan debt, but they may find it more manageable after addressing other financial obligations.

So do you file for bankruptcy, hoping for a fresh start, or do you slug it out, paying off those student loans the hard way? Either way, you don’t want to go it alone. You need someone in your corner – a student loan lawyer.

What Can a Student Loan Lawyer Do for You?

First and foremost, a student loan lawyer, like ours at OlsenDaines, will fight for you and advocate for your rights and best interests. We have the expertise to review your loans, determine if there are any violations or predatory practices, and create a legal strategy to move forward. We’ll negotiate on your behalf with lenders to secure more favorable terms or lower interest rates. We can also represent you in legal proceedings if the need arises. We’ll pursue any and all options to have the debt dismissed or forgiven, if those are possibilities.

A student loan lawyer is a powerful ally who will relentlessly champion your cause and work towards relieving the burden of your student loans.

How Much Does a Student Loan Lawyer Cost?

The fees charged by student loan lawyers will depend on several factors, including the complexity of your case, the services required, and the attorney’s experience and reputation. Setting up a consultation with an attorney can give you a more concrete answer. 

During the consultation, we will take the time to understand your needs, evaluate the intricacies of your case, and provide you with a clear understanding of the potential costs involved. Our goal is to be transparent and work with you to find a solution that aligns with your budget and provides the dedicated legal support you deserve.

We’ll Guide You Through Bankruptcy Options for Student Loan Relief

Though there are several methods for obtaining relief from student loans, the process is rarely easy. But you don’t have to face it all on your own. The debt relief attorneys at OlsenDaines can help you create a plan of action. 

We strive to provide our clients with the information and resources they need to combat debt and find financial stability. By enlisting our expertise, you gain an advocate who will fight for your rights, provide you with comprehensive legal advice, and equip you with the tools needed to overcome the challenges that student loans pose. 

With over 46 years of experience serving Oregon & Washington residents, we know how to access creative relief solutions that can take the stress of serious debt off of your shoulders. From finding other forms of student loan forgiveness to eliminating debts through bankruptcy, we can help you reach financial freedom no matter what your circumstances are.

To schedule your free legal consultation, give us a call today!

How to file an adversary proceeding for student loan bankruptcy

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As most people dealing with debt know, there are many different kinds of debt and some types are more difficult to eliminate in bankruptcy than others. Student loan debt is one such debt that’s not automatically discharged in bankruptcy proceedings. Unfortunately, this fact has led many people to believe that student loans can’t be discharged at all. Many borrower can discharge student loan debt through bankruptcy, but it requires additional steps.

This post explains how to file an adversary proceeding for student debt bankruptcy in Oregon, and help you decide whether it’s the right move for you.

How Do You File an Adversary Complaint for Student Loan Bankruptcy?

Getting student debt discharged through bankruptcy requires filing for an adversary proceeding. An adversary proceeding is a legal action that occurs within a bankruptcy case; it’s a formal process used to address specific issues or disputes between various parties that cannot be resolved through the regular bankruptcy process.

What are the Steps to Getting Student Debt Discharged through Bankruptcy?

The first step should always be consulting with an experienced bankruptcy attorney. Bankruptcy laws are extremely intricate, and this process is no exception. Need help finding a student loan lawyer? Check out our blog on how to hire the best student loan lawyer for you. 

If you and your bankruptcy attorney believe your case meets the criteria, you should proceed with these steps:

  • File the complaint: The complaint is filed with the bankruptcy court overseeing your case. There are specific forms and procedures you need to follow, which your attorney will be familiar with. Filing the complaint initiates the adversary proceeding and sets the legal process in motion.
  • Serving the parties involved: After filing the complaint, it must be properly served to all relevant parties, including the student loan lender or servicer. This ensures that everyone involved is aware of the legal action and can respond accordingly.
  • Responses and negotiations: The opposing party will respond to your complaint. This usually leads to negotiations or settlement discussions. Your attorney will guide you through these interactions and help you make informed decisions about potential resolutions.
  • Court proceedings: Depending on the progress of your adversary proceeding, you might need to attend a deposition and trial. Your attorney will represent your interests and present your case to the judge.
  • Decision rendered: The judge will ultimately make the decision. If the court rules in your favor, your student loans will be fully discharged.  The judge can also order a partial discharge if it appears you can pay back some but not all of your student loans.

How Do They Decide Whether to Discharge Your Student Debt?

The judge will make a decision based on your specific situation. The decision is based on three main guidelines:

  • Are you unable to maintain a minimal standard of living for you and your dependents? This is determined by current income and expenses.
  • Is there a likelihood you will be able to pay back your loans in the future? Factors the judge will consider include disabilities, long-term unemployment, and other adverse circumstances.
  • Have you made a good faith effort to repay your loan up until this point? If you’ve enrolled in an income-driven repayment plan, applied for forbearance or forgiveness programs, or consolidation, this can be used as evidence that you have made a good faith effort to pay.

Are You a Candidate for Student Loan Debt Discharge through Bankruptcy?

If student debt is crushing your ability to become financially independent, you may be a good candidate for student debt forgiveness. Of course, as with any possible legal strategy, it’s vitally important to get an opinion from a lawyer with specialized knowledge – in this case, an experienced bankruptcy attorney. An lawyer who focuses his practice on bankruptcy issues will understand the ins and outs of this particular area of law and can review with you some important considerations before you move forward.

While discharging student loans through bankruptcy is not guaranteed, taking the right steps and seeking professional guidance can increase your chances of achieving a favorable outcome and gaining relief from your student loan debt. If you’re ready to start exploring your options for filing an adversary complaint for student loan bankruptcy, give us a call today. Our experienced Oregon-based bankruptcy attorneys are ready to answer all your questions.

Steps To Hiring a Lawyer For Student Loan Forgiveness

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For many people in the United States, student loans are a source of overwhelming financial stress. If you are struggling to repay your debt, a student loan attorney can help you – from reaching student loan forgiveness to lowering your monthly payments, a lawyer has the expertise needed to significantly reduce your financial burden.

However, if you are already struggling to make payments on your debt, the idea of spending even more money on a lawyer may feel overwhelming. To help you determine whether a student loan lawyer is right for you, here’s what you need to know about the costs (and savings) associated with student debt attorneys.

Why Hire a Student Loan Lawyer?

A student loan lawyer is a legal professional who specializes in the laws and regulations pertaining to student debt. They can provide guidance and representation to borrowers who are overwhelmed with their payments, facing predatory lending practices, or dealing with other debt-related problems. Student loan lawyers can help by:

  • Combatting predatory lenders: If you suspect you are the victim of predatory lending practices, an attorney can help hold your lender accountable. They know the ins and outs of consumer protection laws and can pursue remediation from unfair or illegal lending situations.
  • Negotiating settlements: An attorney can work with your lenders to make your debt more manageable. They may help lower interest rates, map out an achievable payment plan, and find other ways to help relieve the burden of your debt. 
  • Defending against lawsuits: In some circumstances, a private lender may take legal action against you. A student loan lawyer can help you navigate the situation and defend you in court for a more favorable outcome.
  • Navigating forgiveness programs: Many people don’t realize that they may qualify for a student loan forgiveness program. An attorney can examine your situation to help you find and qualify for student debt forgiveness.
  • Discharging student loans through bankruptcy: Depending on your situation, you may be able to discharge your student debt through bankruptcy. Thanks to new policy updates by the Department of Education, student loan forgiveness is more accessible using this approach than ever before.
  • Dealing with debt collectors: Debt collection agencies can be incredibly difficult to deal with. A lawyer will not only protect you against collector misconduct, but they can also handle communications to make your situation less stressful.

How Much Does it Cost to Hire a Student Loan Lawyer?

The cost of a student loan lawyer can vary significantly, often ranging between a few hundred dollars to a few thousand. How much you will pay typically depends on which fee structure the lawyer uses. The most common fee structures include:

  • Hourly rates: When you pay the lawyer an hourly rate, it can be challenging to predict exactly how much their services will cost in total.
  • Flat fees: This is when you pay the lawyer a set amount for their services, which can be helpful if you want to know exactly how much their services will cost before starting.
  • Contingencies: This is where the lawyer is only paid if they reach a desired result. It is most commonly used for class action lawsuits.
  • Hybrid plans: A lawyer may charge both a flat fee and a contingency. Similar to a regular contingency, this is most common in class action lawsuits.

Can Hiring a Student Loan Lawyer Save Me Money?

Though hiring a student loan lawyer may seem costly, doing so could save you thousands of dollars in the long run. By relieving some – or all – of your student loans, they can drastically lower your monthly payments, help you combat wage garnishment, and overall make your debt more manageable. The money you invest in a student loan attorney today can certainly save you a lot in the future.

Get a Free Legal Consultation

Considering investing in a student loan lawyer, but want to learn more about the process or costs? Get a free legal consultation from the experts at OlsenDaines! For over 40 years, we’ve been representing residents in Oregon with the goal of educating, informing, and empowering our clients. Your financial recovery is our top priority, which is why we offer affordable rates and disclose all of our fees from the very beginning. If you’re ready to learn more or get started, call us today to schedule your consultation.

Explaining the New Bankruptcy Discharge Process for Student Loan Borrowers

Person adding up student loan debt on calculator

Over 42.8 million Americans have student loans, making it one of the most common forms of debt in the United States. While the amount of student loan debt has increased in recent years, it remains one of the most challenging types of debt to discharge through bankruptcy. However, the Department of Education recently reformed its policies to make the discharge process easier and more accessible to student loan borrowers. In this guide, we’ll explain everything you need to know about the new bankruptcy discharge process for student loans. 

Adversary Proceedings and “Undue Hardship”

In order to be considered for student loan discharge, individuals must initiate a separate lawsuit within their bankruptcy case called an “adversary proceeding”. During this process, the debtor is essentially suing the student loan lender. To do so, however, the debtor must demonstrate that he or she is experiencing “undue hardship” as a result of the loans.

Prior to these policy changes “undue hardship” was an undefined term in the bankruptcy code, which made it challenging for courts to judge each case by universal standards – leaving a lot of room for interpretation. 

In the past, most courts used something called the “Brunner Test” to determine who qualified for student loan discharge. This test was originally created in a 1987 court case during which a woman attempted to discharge her student loans less than a year after earning her degree. The goal of the test was to deter individuals from rushing into bankruptcy immediately after graduating, and it includes three questions:

  • Have you made a good-faith effort to repay the loans?
  • Are you unable to maintain a minimal standard of living while making the payments?
  • Is your financial situation likely to persist?

If the answer to each of these questions is “yes” and is supported by extensive evidence, then the loans can be discharged. 

On the surface, this may seem like a great system for discharging student debt. However, adversary proceedings are lengthy and costly, and they often weren’t successful because the requirements to pass the Brunner Test were still highly variable. Over time the test became increasingly difficult to pass, and many legal experts think it is now close to impossible to have loans discharged through this method.

How New Policy Changes Make Student Loan Discharge More Accessible

Debtors are still required to initiate an adversary proceeding within their bankruptcy case in order to be considered for student loan discharge.  The recent policy changes will ease the process by:

  • Setting clear standards for what is considered “undue hardship”: The current process uses arbitrary methods to review evidence and determine whether the debtor is experiencing undue hardship. According to the Department of Justice’s recent press release, the new process will include a thorough review of the debtor’s financial situation against concrete standards. These standards will be based on data provided by the Department of Education, along with other information that could contribute to undue hardship. This will ensure each debtor is judged fairly, without room for subjectivity.
  • Allowing for partial discharge if appropriate: Historically, student loans were either completely discharged or left entirely intact. The new policy changes allow for partial discharges depending on the debtor’s financial situation, which will make relief more accessible to those who are struggling with student loans. 

Considering Bankruptcy?

If you are overwhelmed with debt and need relief, don’t hesitate to contact the knowledgeable bankruptcy attorneys at OlsenDaines. Whether you’re dealing with significant student loans or other types of debt, we can assess your situation and help you determine the best course of action to regain financial stability. With over 40 years of experience serving individuals and businesses throughout the state of Oregon, we know how to help you with everything from foreclosures to creditor harassment. Whatever you’re facing, we can help. Just give us a call today to schedule your free legal consultation.