Last Thursday, November 17, 2022, the Biden administration announced a policy change regarding the treatment of student loans in bankruptcy. The change in policy should make it easier for debtors to discharge federal direct loans under the “undue hardship” provision of the Bankruptcy Code.
It may be advisable for debtors who have substantial student loan debt to discharge these debts in bankruptcy now, especially since the forgiveness program is tied up in the Courts, and may never come to fruition. In addition, this new policy is unique to the Biden administration and may not be followed by the next President.