If you are drowning in debt and cannot seem to work up enough money each month to even make your auto and mortgage payments, you are not alone. Many people in the post-COVID U.S. are drowning in debt. Taken a step further, lots of people who are living paycheck to paycheck as they approach middle-age blame massive student loan debt as the major culprit.

If you are tired of sleepless nights, tossing and turning while wondering how you are going to come up with the money to pay all your bills, you might want to consider filing for bankruptcy.

According to a representative of Pearson Law, PLC, bankruptcy lawyers in Scottsdale, AZ, an experienced and reputable bankruptcy lawyer can help you decide whether or not filing for bankruptcy is the right move for you and your financial future.

What exactly is bankruptcy? It is just one major way of helping you deal with a massive debt you cannot possibly repay given your present financial circumstances. Most people will file either a Chapter 7 or a Chapter 13 Bankruptcy.

The Chapter 7 option is “a liquidation bankruptcy” that will eliminate unsecured debts like medical bills and credit cards without you having to make further payments.

With most Chapter 7 bankruptcies, the debtors are legally entitled to keep most if not all of your assets. You can file a Chapter 13 bankruptcy if you have a lot of debt but have enough income to make regular payments on that debt.

But where do student loans fit into the bankruptcy equation? With some of these loans totaling hundreds of thousands of dollars, it is no wonder so many people end up defaulting on them. This type of financial issue, however, could change very soon.

According to a new article originating out of Washington, D.C., pressure is mounting on the Biden Administration to abolish student loan debt via bankruptcy.

Undue Hardship

President Joe Biden actually campaigned on reforming the bankruptcy system. In its present state, the bankruptcy system makes it very difficult if not impossible for you to discharge your student loans. Borrowers must prove that paying off your student loans would cause “undue hardship.”

But last fall, Biden’s federal student aid chief addressed Congress stating that the Department of Education had begun discussion revolving around reforming the student loan bankruptcy rules. More recently, the agency has started fighting for borrower relief in federal bankruptcy court.

Judges Side with Borrowers

Since the beginning of 2022, government lawyers have appealed two separate high-profile bankruptcy decisions in which the judges took the sides of the borrowers. Their actions allowed the borrower’s hefty student loan debt to be discharged.

Because news of the decision went viral on the Twittersphere and in the cable television news outlets, the government, fearing bad optics, was quick to drop the appeals. However, the damage was done. Attention to what many advocates are calling a “stubborn commitment to a flawed policy” had been firmly established.

However, the vice president and chief counsel at the National Student Legal Defense Network said this about the decision: abandoning opposition to student loan debt being discharged based upon “media pressure” is most definitely not the solution going forward. The agency is more or less playing “whack-a-mole” with families who are struggling with their finances. And in the post-COVID world, many are indeed struggling.

Revising the Approach to Bankruptcy

Just last week, it was widely reported that the National Student Legal Defense Network has formed an alliance with several advocacy groups that are calling on the Department of Education to put an immediate pause on all efforts to appeal and/or oppose student debt discharges that are officially filed in bankruptcy court.

That said, a spokesperson for the Education Department told a major cable news network that the agency is determined to revise its overall approach to bankruptcy. It is looking to “streamline the process” and, at the same time, make certain that student loan borrowers get a reasonable opportunity to discharge their loans, based upon their individual financial circumstances.

The spokesperson added via email that, in the meantime, the Justice Department in cooperation with the Department of Education is working together to ensure that the federal government does not engage in appealing cases where the borrower has successfully proven undue hardship.

It should be noted that at present, student debt is treated differently in bankruptcy court than most other varieties of debt, making it extremely difficult for anyone to receive a full discharge.