On August 3, 2021, the Senate Judiciary Committee held a hearing to examine student loan bankruptcy reform. Committee members and witnesses highlighted the unfair treatment of student loan debt under the bankruptcy code and the rigid standard borrowers must meet to discharge student loans.
U.S. Senators Dick Durbin and John Cornyn introduced TheFresh Start Through Bankruptcy Act to address the growing bipartisan consensus that struggling borrowers need student loan bankruptcy reform.
President Biden signed the COVID-19 Bankruptcy Relief Extension Act on Saturday, March 27, 2021 to extend critical bankruptcy relief provisions under the CARES Act that were set to expire on the same day. The bipartisan bill was introduced in late February 2021 and was passed by Congress just one day before the President signed it into law.
On February 25, 2021, U.S. Senators Dick Durbin and Chuck Grassley introduced the COVID-19 Bankruptcy Relief Extension Act to extend certain bankruptcy relief provisions enacted as part of the March 2020 CARES Act and December 2020 omnibus appropriations bill.
The week of Christmas, Congressional leaders released the text of the new $900 billion COVID-19 relief package. After a week of push-back, President Trump signed the bill on Sunday evening. In addition to the $600 per adult stimulus payment, additional PPP funding, rental assistance, and school/college aid, the bill also provides additional updates on certain bankruptcy provisions. Those changes, which are spelled out in Division FF of the bill “Title X-Bankruptcy Relief,” include the following:
In what appears to be more good news for those with student loan debt, the Tenth Circuit recently joined the Fifth Circuit by holding that certain private student loans are dischargeable in bankruptcy.
In McDaniel v. Navient Solutions, LLC, No. 18-1445 (10th Cir. Aug. 31, 2020), the Tenth Circuit held that an educational loan does not constitute “an obligation to repay funds received as an educational benefit” under Section 523(a)(8)(A)(ii) of the Bankruptcy Code.
Section 523(a)(8) of the Code provides, in pertinent part: