President Obama signed an executive action on Tuesday that would make it easier for Oregon bankruptcy filers to discharge certain kinds of student loans. As any would be Oregon bankruptcy filer knows, student loan debt is extremely difficult to eliminate now. The most common path to discharge now requires a showing of undue hardship which is now so stringently defined that an Oregon bankruptcy attorney could go through her entire career without finding a case that would meet the required criteria.

It appears that the undue burden standard may now be broadened such that more debtors would potentially be able to eliminate their student loans. It is, however, far from certain how many Oregon debtors will be affected and what the new standard for discharge will be.

We know that the executive branch has directed the Secretary of Education, by July 15, 2015, to “issue information highlighting factors the courts have used in their determination of undue hardship, to assist parties who must determine whether to contest an undue hardship discharge in bankruptcy of a federal student loan.” The president has also suggested relief might be forthcoming as well concerning private student loans.

Obama has asked the the Consumer Financial Protection Bureau, the Department of Education and the Treasury Department to make recommendations by Oct. 1, concerning any needed changes to bankruptcy laws and other laws and regulations. Some 40 million Americans have student loans totaling approximately $1.3 trillion, the White House says. The average debt is about $28,000.



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