Michigan residents face financial hardships for a large variety of reasons. One of the most common reasons Michiganders struggle to keep up with their financial obligations is overwhelming student loan debt. Of the 1.4 million Michigan residents with outstanding student loans, approximately 1 million of those residents owe between $20,000 and $200,000.
Traditionally, individuals with student loan debt have had little to no help or recourse when their repayment plan becomes unmanageable. While there has been a longstanding process by which debtors can have student loans discharged in bankruptcy, very few have actually qualified under the federal guidelines. In fact, research published in 2020 shows that around 250,000 Americans with student loan debt file for bankruptcy every year; however, less than 300 (.01%) are successful in discharging their student loans. Although debtors can discharge most other debts, the average American household with student loan debt owes nearly $60,000, which has left many who file for bankruptcy without the financial relief they need.
Luckily for Michigan residents, on November 17, 2022 the US Department of Justice and Department of Education released a joint statement outlining new bankruptcy guidelines for discharging student loan debt. Under the new process, debtors can receive discharge based on 3 factors:
- (1) Present Ability to Pay – This is determined by a straightforward review of a debtor’s current financial situation. Simply put, if a debtor’s expenses equal or exceed their income, they do not have the present ability to pay.
- (2) Future Ability to Pay – This factor is determined by a debtor’s overall circumstances, and looks at multiple criteria such as age, medical condition, unemployment history, level of education, and repayment status.
- (3) Good Faith Efforts – This factor looks at a debtor’s overall efforts to earn income, manage expenses, and repay their student loans.
With these new guidelines in place, Michigan residents have more tools at their disposal to regain control of their financial situation. With over 75 years of bankruptcy experience, the attorneys at Gudeman & Associates can review your specific situation and help determine the best course of action to protect your family’s financial future. Our firm provides both in-person and online resources to help Michigan families understand and take control of their financial future. Contact us today to schedule a free 30-minute consultation.