The most common mistakes in a student loan bankruptcy case are avoidable: signing the sworn attestation without checking it, guessing at income and expenses, and leaving out the facts that help you. No single mistake decides every case, but each one can slow things down or weaken how the government sees your situation.
Since November 2022, the U.S. Department of Justice has used a sworn attestation form to decide whether to agree that federal student loans held by the U.S. Department of Education should be discharged in bankruptcy. Here is where people tend to stumble.
1. Not checking who holds your loans
The Justice Department process covers federal loans held by the Department of Education. Private loans are outside it, and some older federal loans may be held by someone other than the Department. Before anything else, log in to studentaid.gov and confirm who holds each loan.
2. Signing the attestation without reading it closely
You sign the attestation under penalty of perjury. The form asks you to confirm that the loan and school information the government gives you is correct and complete. If you disagree with that information, the form lets you supply your own answers instead. Read every line before you sign.
3. Estimating income instead of documenting it
The form figures your income from your most recent tax return or, in some cases, from four consecutive pay stubs. Income from other sources, such as Social Security or a pension, needs its own proof. A round number from memory invites questions, so pull the real documents first.
4. Getting your household wrong
The form asks who lives in your household, and the expense allowances depend on household size. Counting too many or too few people throws off every number that follows.
5. Not explaining expenses above the standards
The government compares your expenses to the IRS Collection Financial Standards. For some categories, such as food and clothing, you are allowed the full standard amount. For others, such as housing and transportation, you are limited to what you actually spend, up to a cap for your area and household size.
If a real expense runs higher, the form gives you space to explain why. For example, a parent who rents a larger home to care for a disabled adult child should say so. Leaving that space blank wastes your best chance to be heard.
6. Assuming you are out of luck because you never joined an income-driven plan
Justice Department guidance says that not enrolling in an income-driven repayment plan does not, by itself, show a lack of good faith. Making a payment, applying for a plan, or responding to your servicer or a collector can each count as a good-faith step. The form asks why you did not enroll, so give an honest, specific answer.
7. Skipping the questions about the future
You must also show that your situation is likely to last. The guidance presumes this in certain cases: you are 65 or older; you have a disability or chronic injury that affects your income; you have been unemployed at least five of the last ten years; you did not finish the degree the loans paid for; or your loans have been in repayment status for at least ten years. These presumptions can be rebutted, and they are not the only way to make the showing. If none applies, describe the concrete facts that limit your earnings.
The honest limits
Avoiding these mistakes does not guarantee a result. The government may agree to a full discharge, a partial discharge, or none at all, and the bankruptcy judge makes the final decision. Every case depends on its own facts.
Talk to us
If you have federal student loans held by the Department of Education and want to know whether this process fits your situation, your first consultation is free, by phone or video. Call the Law Office of Brian D. Shapiro at 702-386-8600.