The Biden administration’s decision to make it easier to discharge student loans in bankruptcy could offer a new safety valve for debtors who have exhausted other options for getting out from under heavy debt loads, the Wall Street Journal reported. The move, announced Thursday, comes as President Biden’s broader plan for mass student-debt cancellation is in limbo after being blocked by two separate federal courts. That plan calls for canceling up to $20,000 in debt for borrowers under certain income thresholds. It would render up to 20 million people free of debt, around half of all student-loan borrowers, if courts allow it go forward. The bankruptcy changes set specific requirements for borrowers to prove that they are experiencing economic distress. Government lawyers will assess a borrower’s ability to repay their loans based on a set formula — whether expenses equal or exceed a debtor’s income — and other considerations, such as retirement age, disability, educational attainment and job history. The scope of its impact will depend on how the new rules are applied by judges, lawyers and student-loan borrowers across the country in individual bankruptcy cases. Over time, the handling of these cases could differ depending on which party controls the White House. Read more. (Subscription required.)
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