Student loans have been a sticky problem for borrowers for a long time. And even though the Law Offices of Michelle Labayan have been helping people with their loans for some time, our abilities to help you get your loan discharged through bankruptcy have always been limited.
In the past, it was all about proving “undue hardship,” which was very difficult to do.
Now, thanks to a report by the American Bankruptcy Institute, it might get just a little easier.
The report has recommendations for lawmakers. They may or may not take the ABI up on those. Sometimes lawmakers pay attention to these reports, and sometimes they don’t.
But it also has recommendations for judges, and that’s where this report gets exciting.
Many judges might want to be a bit more lenient on the “undue hardship” requirements than they often are. Judges, like most lawmakers and officials, are well aware student debt has become a crippling problem for this country. Even the IRS is aware.
But judges are often wary of moving against established precedent, or of changing their interpretations of the laws without solid legal backing to do so. The ABI provides that backing, giving judges the legal weight they need to make different decisions.
For example, in the past “undue hardship” has been interpreted to mean the borrower would be unable to subsist for the rest of his or her life if forced to pay the loans. The ABI report suggests the standard should be whether the borrower would be pushed into poverty during the normal lifespan of the loan.
This is a mountain of difference. As different as “guilt beyond a reasonable doubt” vs. “preponderance of evidence,” which is why sometimes a person can win an acquittal in a criminal case only to lose their related case in civil court. Language matters, and the changes in the standard matter, too.
Will New York City judges go for it?
It’s tough to tell. It was a New York judge in 1985 that first came up with the narrowly applied “undue hardship” standard, which, among other things, demanded the borrower must face a “certainty of hopelessness” if unable to repay.
But that was in 1985. Today, lawmakers are already trying to get bankruptcy protections restored for student loan borrowers.
And the ABI report means you might not have to wait until they manage to do just that. Federal bankruptcy judges working out of New York City may well leap at the chance to give more borrowers relief.
Not sure whether you could meet even the expanded standard? Call and make an appointment so we can discuss your options.