After filing for Chapter 7 or Chapter 13 bankruptcy, you can start the process to discharge your student loans by submitting an Adversary Complaint under 523(a)(8). Once you’ve properly notified the US Department of Education and all other relevant parties, the formal procedure begins. Your case is then assigned to an Assistant US Attorney (AUSA), who will provide you with a detailed breakdown of your loans, payments, and other relevant information. This document is known as a litigation report. Once you’ve received this information, along with what you provided in your bankruptcy petition and schedules, you’ll have all the necessary details to start filling out the attestation. You can obtain a fillable PDF form of the attestation for free from the US Trustee, or you can create your own version. If you choose to draft your own, it’s important to adhere to the format used in the US Trustee’s version.
This document is crucial in the student loan discharge process because it provides the AUSA with all the necessary information to assess whether repaying your student loans would cause an undue hardship. This standard is used by the courts to evaluate student loan adversaries.
Attestation Overview
The bankruptcy attestation requests various details, many of which should have been previously provided in your bankruptcy schedules and petition. And if the information relates to your student loans, it should have been included in the litigation report. If you are certain about your student loan payment history and related details, you might be able to submit your attestation before receiving the litigation report. However, it is usually safer to wait until you have that information before completing the attestation form.
The student loan discharge attestation is broken down into multiple sections which encompass:
- Personal Information:
- Name, age, residence, and household size.
- Confirmation of Student Loan Information:
- Verification of outstanding balances, monthly payments, and educational history.
- Current Employment Status:
- Details about current employment or unemployment.
- Current Income and Expenses:
- Household gross income from all sources.
- Monthly expenses including living expenses, uninsured medical costs, and other necessary expenses.
- Future Inability to Repay Student Loans:
- Factors like age, unemployment, or disability affecting future repayment.
- Prior Efforts to Repay Loans:
- Payment history, applications for forbearance or deferment, and attempts to enroll in repayment programs.
- Assessment of Current Assets:
- Real estate, motor vehicles, retirement assets, and interests in other entities.
- Additional Circumstances Supporting Loan Discharge:
- Submission of any additional factors supporting the discharge of student loans as an undue hardship.
How to Fill out the Student Loan Attestation in Bankruptcy Adversaries
Section I – Personal Information (Questions 1-3)
In Section I, the Personal Information Section, the attestation requires detailed personal information for each member of your household, including age and residence address which is then used to determine household size. Your household size is important because, similar to the means test, the attestation utilizes the IRS national standards for expense calculation. As I have mentioned before, determining household size can be complex given modern living arrangements, but you should make an honest effort to describe your household size as accurately as possible.
Submitting truthful and accurate information on the attestation is crucial for a full evaluation of one’s financial situation and household dynamics. Inaccuracies or omissions might impede the assessment process and strain the relationship with the AUSA, who plays a vital role in the proceedings. My aim has always been to maintain a positive rapport with the AUSA by ensuring a streamlined and straightforward process. Therefore, it’s imperative for individuals to diligently provide all necessary information to facilitate a thorough and efficient evaluation of their claim for student loan dischargeability.
Section I – Student Loan Confirmation Section (Questions 4-8)
Section 2 of the attestation focuses on confirming crucial details regarding the student loans in question. This includes verifying the outstanding balances, monthly payments, and educational history associated with the loans. By ensuring the accuracy of this information, individuals can provide a clear picture of their financial obligations and educational background, aiding in the assessment of their eligibility for dischargeability.
The litigation report, referred to in paragraph 4 of the Attestation, encompasses the essential “student loan information and educational history” cited. If individuals find this information accurate upon review, they can simply check box 4, indicating their agreement, and bypass questions 5-8. This streamlines the process, allowing for efficient completion of the Attestation when the provided details align with their Department of Education records.
Section II Current Income and Expenses
This section deals with household income and expenses. Remember if you are married you must include the income and expenses for the entire household, not just yourself. Most of the information required can typically be in your bankruptcy documents, specifically Schedules I and J, as well as on your means test forms (Form 122A-1 & 2). If you’re filing your Discharge Adversary within 18 months of submitting your Schedules I and J, you can directly reference the income and expense information on those schedules. Here is a brief rundown on the information required in this section:
A. Household Gross Income:
- Individuals provide details of their current monthly household gross income from all sources.
- This includes income from various sources such as employment, unemployment benefits, Social Security benefits, and other sources.
- Individuals must indicate how they calculated their household gross income, whether from recent tax returns, pay stubs, or other verification documents.
- Documentation is required to support the income information provided.
B. Monthly Expenses:
- Subsection 14(a) – Individuals check a box to indicate whether their current monthly household expenses either exceed or do not exceed the IRS National standards for various expense categories based on the number of people in the household..
- These categories include food, housekeeping supplies, apparel and services, non medical personal care products and services, uninsured out of pocket medical costs and miscellaneous expenses.
- Documentation may be required to support certain expenses, and explanations may be necessary for expenses that are above the IRS National Standards
- Subsection 15(a) – Payroll deductions such as taxes, retirement contributions, union dues, life insurance, court-ordered alimony and child support, and health insurance premiums are subtracted from income.
- Subsection 15(d) Other Necessary Expenses – In this same section, individuals enter court-ordered alimony and child support payments if not deducted from pay, along with explanations for necessary expenses such as babysitting or childcare costs. Additionally, it includes provisions for health insurance, life insurance, dependent care, payments on tax debt, other student loans, and any additional expenses essential for maintaining a minimal standard of living.
- Individuals calculate their remaining income after deducting all monthly expenses and payroll deductions from household gross income.
- Anticipated future monthly expenses that are not currently met can also be included.
Section III Future Inability to Repay Student Loans
Here individuals provide reasons why they believe their financial circumstances are unlikely to improve significantly over the repayment period of their student loans. Detailed explanations are required for each reason selected, outlining its impact on the individual’s financial situation.
They indicate factors such:
- Age (65 or older)
- Extended repayment status (10 years or more)
- Incomplete degree hindering future earning potential
- Disability or chronic injury affecting income
- Unemployment for at least five of the past ten years
- Attending a now-closed institution for their degree
- Current unemployment
- Inability to find employment in their field of education
- Insufficient income to make substantial loan payments
- and other circumstances affecting repayment.
The legal precedent isn’t fully established on the last factor, but I believe there are compelling legal arguments to consider. Here are just a few examples of potential arguments that could be presented:
- Significant changes in family responsibilities, such as caring for an elderly parent or a disabled family member.
- Natural disasters or unforeseen events leading to significant property damage or loss.
- Litigation issues or obligations, such as ongoing legal battles or court-ordered payments.
- Incarceration and the resulting inability to find work after release.
- However, case law has established that debts should not be discharged if the debtor’s situation was self-inflicted.
- “the debtor may not willfully or negligently cause his own default, but rather his condition must result from factors beyond his reasonable control.” In re Roberson, 999 F.2d 1132
- A “debtor’s future employment limitations or lack of earning potential caused by the debtor’s choice to engage in criminal conduct” is not a factor “beyond the debtor’s reasonable control.” Hurley v. United States, 601 B.R. 529
See also Chenault v. Great Lakes Higher Educ. Corp, 586 B.R.414
- Personal crises, such as divorce, loss of a spouse, or domestic upheavals, impacting financial stability.
- Geographic limitations or challenges, such as living in areas with limited job opportunities or high living costs.
Section IV Prior Efforts to Repay Loans
This section addresses the prior efforts made by the individual to repay the student loans under consideration. It includes details such as the total payments made on the loans, any forbearances or deferments sought, attempts to contact loan servicers or the Department of Education regarding payment options, and enrollment or non-enrollment in income-driven repayment programs.
Additionally, it allows individuals to describe any other actions demonstrating good faith efforts to repay the loans, such as seeking employment, maximizing income, minimizing expenses, applying for loan consolidation, or engaging with third parties for assistance with student loan debt management. Also keep in mind, only Government Department of Education Student Loans are relevant here, and this section only deals with those loans.
Section V Current Assets
This section details the current assets owned by the individual. It includes parcels of real estate with their addresses, owners, fair market values, and outstanding mortgage balances. Additionally, it lists motor vehicles along with their makes, models, fair market values, and outstanding loan balances. Retirement assets held in 401k, IRA, and similar accounts are also disclosed, along with interests in corporations, limited liability companies, partnerships, or other entities. Lastly, it mentions any anticipated tax refunds.
In different districts, practices may differ, but from what I’ve gathered, the AUSA typically doesn’t factor in the value of your family home when deciding on discharge. Moreover, if your retirement accounts fall under ERISA protection, they’re usually not taken into account either. These assets are crucial, and compelling their liquidation to meet student loan obligations could potentially worsen individuals’ financial situations.
And there you have it. Simply sign at the end of the form, print your name, add the date, and submit it to your AUSA along with any necessary supporting documents.
Discharge Adversaries Down the Road – Final Thoughts
One thing that’s been on my mind is the possibility of reopening old bankruptcy cases. Let’s say a couple of years down the line after your bankruptcy is complete, you hit a rough patch like losing your job or experiencing a significant drop in income. Or maybe your expenses shoot up, perhaps due to a divorce or child support. Could you go back and reopen your old bankruptcy to wipe out your student loans? From what I understand, the answer is yes. But here’s the kicker: there’s a clear starting point for the student loan discharge program, which kicked off on November 17, 2022. So, if your bankruptcy case wasn’t active on that specific date, you’re out of luck when it comes to filing a student loan adversary down the road.
If you are in Illinois and you want to speak more about your options on your student loans, feel free to schedule a consultation with Steven J. Grace.
