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Bankruptcy Law: An Untapped Resource for Student Loan Relief
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In recent years, the burden of student loans has weighed heavily on millions of Americans. This burden was exacerbated by the Supreme Court's recent decision to strike down President Biden’s student loan forgiveness plan.
Supreme Court's Decision on President Biden's Loan Forgiveness Plan
In response to the Supreme Court decision, the administration proposed several new flexibilities for borrowers. These include a 12-month “on-ramp” period during which late fees and penalties would be waived, the introduction of a new income-tied repayment plan, and the “Fresh Start” program for defaulted borrowers.
However, these initiatives fail to tackle the root of the problem, which is the enormous and unsustainable burden of student loan debt. There is no student loan forgiveness here.
For instance, the Saving on a Valuable Education (SAVE) plan, which aims to reduce monthly payments, only offers marginal relief and does not eliminate the debt. Moreover, the "Fresh Start" program, while useful for borrowers in default, falls short of providing substantial relief, particularly for those drowning under a mountain of accumulated debt.
Amid this scenario of concern and uncertainty, a crucial pathway to relief has been largely overlooked: bankruptcy law.
New Flexibilities Proposed by the Administration
In a significant and under-publicized development last November, the Department of Justice made a profound amendment to the rules governing bankruptcy. This step has made it considerably easier for borrowers holding federal student loans to discharge these debts in bankruptcy.
To qualify for discharge under these new provisions, borrowers must meet at only one of the following criteria:
The loan has been in repayment for 10+ years.
No degree was obtained with the loan.
The borrower is over 65.
The borrower has been unemployed for five of the last ten years.
The borrower has a disability or injury.
Bankruptcy Law as a Crucial Pathway to Relief
These rules were introduced to align with the core principle of bankruptcy law, which is to offer a lifeline to those genuinely unable to meet their financial obligations. This is not a straight debt forgiveness; it's a vital avenue of relief for those buckling under a debt they genuinely cannot afford to repay.
However, it's a sad reality that awareness of these changes is low, and not just among the general public. Even among legal professionals, many bankruptcy attorneys have yet to file these cases, leaving numerous eligible borrowers without the relief they desperately need. But there are exceptions.
Successful Cases Filed by DebtStoppers
At DebtStoppers, we seized the initiative immediately after the new guidelines were released. We started filing these cases on behalf of our clients right away. The results have been heartening. To date, we have filed over 50 such cases, and have yet to lose a single one. This is a new and exciting chapter in the practice of bankruptcy law.
I remember the frustration I felt when meeting with clients in the past, knowing that, as an attorney, I could only help them with a fraction of their total debt. Now, with the new guidance in place, I'm able to assist clients with the entirety of their debt. The sense of relief and the new hope this gives to the clients is immeasurable.
Uncertainty of Rule Changes Beyond Biden's Administration
However, we need to temper our excitement with caution. The current rule changes may not survive beyond President Biden's administration. A new administration, a new Attorney General, will bring new policies, and we don't know what place these changes will have in the new scheme of things.
That being said, if we can secure relief for student loan borrowers now, that relief will be permanent, being sanctioned by a federal court order. The government cannot attempt to revisit the issue a year later. Therefore, it's an incredibly empowering time to be able to provide aid where Congress has been slow to act.
Encouragement from DebtStoppers
We, at DebtStoppers, encourage everyone struggling with student loan debt to visit StudentAid.gov, review their loan status, and consult with an experienced bankruptcy lawyer. If you or someone you know is burdened with an insurmountable student loan debt, reach out to us at DebtStoppers.
Pat is the Managing Partner of The Semrad Law Firm, which does business as DebtStoppers, the largest consumer law firm in the United States. Patrick concentrates on providing access to affordable legal representation to bankruptcy clients regardless of their income. Since 2004, the firm has grown from four attorneys in Chicago to over 85 attorneys in five states with offices in Europe as well.
Practicing consumer bankruptcy law is a privilege for Pat. He knows of no other area of law that empowers an attorney to make such an immediate positive impact on his clients’ lives. It has been Pat’s mission to foster a team of attorneys and staff who are as passionate about helping individuals and families that are facing financial hardship. In this, Pat views his position as Managing Partner to be a support role dedicated to providing resources and professional development to every employee at DebtStoppers.
Pat periodically volunteers legal services through the North Suburban Legal Aid Clinic and the Together for Childhood Network in Lake County. He advises The Balance Project, a local not-for-profit founded by his wife, Agi, which supports mental health throughout the community.
Pat is a member of the Illinois Bar, Florida Bar, and General Bar for the U.S. District Court for the Northern District of Illinois. Mr. Semrad graduated magna cum laude from DePaul College of Law, where he was a member of the DePaul Law Review. He also received his Bachelor’s degree in Finance from DePaul.
Outside of his professional activities, Pat is an active member of the Windy City Chapter of YPO. He is also an active community member in Highland Park and regularly participates in local events and political campaigns. He enjoys woodworking, sailing, and playing terrible paddle. He is also a member for the Union League Club of Chicago.
Education: J.D., DePaul College of Law · B.S., Finance, DePaul University, 2001
