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Biden continues to fight student loan borrowers in bankruptcy court

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  • The Biden administration has promised to alter the bankruptcy process for student loans.
  • The Department of Education, on the other hand, opposes borrowers’ claims in court.
  • Advocates are pressing the government to drop its resistance until the reforms can be implemented.

Rosa Perez, who owes $78,000 in student loans, filed for bankruptcy in January

Perez earns around $3,400 per month as a public school counselor, which she claims is roughly equivalent to her monthly expenses in a court filing. Perez has heart difficulties, which have resulted in enormous medical fees, in addition to paying for her daughter’s expenses – she claims she receives no child support from her daughter’s father.

Perez’s spending “is as conservative as feasible,” according to the statement, but she “is still unable to meet her monthly obligations, with no ability to make student loan payments on their terms.”

Perez requested for a bankruptcy discharge of his loans, but the Department of Education denied him on Monday. It was the latest example of how President Joe Biden’s administration continues to fight borrowers in court despite promising improvements.

When student debtors feel they have no other option for repaying their obligations, they file for BankruptcyHQ – Chapter 7 and Chapter 13. The “undue hardship” requirement, which Biden helped enact in 2005, requires debtors to demonstrate that they are unable to maintain a minimum standard of living, that their circumstances are unlikely to change, and that they have made a good faith effort to repay their loan.

In October, Richard Cordray, the director of the federal student aid office, told Congress that he will strive to change the bankruptcy process and ensure that students who need assistance can get it. Several borrowers have been denied debt forgiveness by the Department of Education since then.

“The system isn’t working properly. It must be reformed…and we are determined to do so “According to Cordray. Consider what happened last November before a House education subcommittee. “Discussions with the Ministry of Justice have already taken place. They, too, are ready for us to change our strategy.”

Some politicians and campaigners are now concerned, particularly as the Department of Education continues to oppose the borrowers’ court challenges.

The Ministry of Education has taken precautions to prevent borrowers’ student loans from being cancelled

Ryan Wolfson, 35, was released from over $100,000 in college debt in January after a judge decided he had demonstrated excessive hardship. The Ministry of Education filed an appeal two weeks later. The department, however, abandoned its appeal a day later.

“The Ministry of Education has said publicly that it is reviewing current bankruptcy policies, a process that is still underway.” “Insider was told at the time by a department spokeswoman. “”Any borrower in adversarial bankruptcy proceedings may request and receive a stay on their proceedings as long as the suspension of student loan payments continues in effect,” the spokeswoman stated.

In addition to the appeals, the government continued to file answers rejecting borrowers’ requests for debt discharge. The administration turned down a request for the release of a 77-year-old former nurse who was unable to secure loan forgiveness under the Federal Service Loan Forgiveness Scheme, which allows civil servants to pay off their debt after 10 years of qualifying payments.

It’s hardly surprising that the department opposes the bill because it supervises federal student loans. While he stated that he would examine bankruptcy discharges on a case-by-case basis, several advocates and lawmakers believe that the administration should not face any opposition until it implements improvements.

Student Defense, a consumer advocacy group, has joined 16 other organizations in urging the Department of Justice to “immediately drop objections to persons seeking undue hardship discharge in bankruptcy proceedings while these improvements are implemented.”

Senate Majority Leader Chuck Schumer declared at a news conference in February that he “definitely” supported a ban on objections in answer to a query from the Daily Poster.

“It’s absurd that other individuals may declare bankruptcy but students cannot,” Schumer remarked.

The Department of Education’s spokesperson did not say whether the department would consider ending the opposition, but told Insider that it was considering it “Financially distressed borrowers should be given the option of filing for bankruptcy to repay their student loans, but the process often produces unfair results.

The Department of Education has promised to evaluate its bankruptcy policy in order to shorten the process and give borrowers a fair shot.”

“In the meantime, the Department of Education and the Department of Justice are working together to ensure that the government does not appeal bankruptcy cases when the borrower has demonstrated excessive hardship,” the spokeswoman noted.

Advocates hope that debtors’ petitions for assistance will not be denied in the future.

“While we applaud the Department’s commitment to altering how it treats bankrupt student borrowers,” Aaron Ament, president of Student Advocacy, told Insider, “it continues to oppose furloughs for cancer patients, struggling grandparents, and public school teachers with critical medical issues.” “We join Senator Schumer in advocating for a pause on legal action against insolvent student borrowers until the Department of Education implements new rules that prioritize student borrowers’ interests.”

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