How 2024 Federal Policy Changes Are Transforming Long Island Family Financial Recovery from Chapter 7 Bankruptcy and Student Loan Parent PLUS Defaults

Long Island families struggling with overwhelming debt from Parent PLUS loan defaults now have unprecedented opportunities for financial recovery, thanks to significant federal policy changes implemented throughout 2024. These transformative updates to bankruptcy law and student loan discharge procedures are creating new pathways for families to regain financial stability while protecting their most valuable assets.

Revolutionary Changes in Student Loan Bankruptcy Discharge

Student loan bankruptcy law is changing in 2024, offering new opportunities for federal student loan borrowers and those with private loans. New reforms and proposed legislation aim to simplify the process, making it easier for struggling borrowers to discharge student loans. The most significant development is the Department’s updated guidance for Assistant United States Attorneys (AUSAs) defending adversary proceedings where borrowers are seeking to discharge student loan debt, which correctly reflects the policy that the holder must evaluate the cost of objecting to the borrower’s claim of undue hardship in court and may concede discharge if the costs of defending the adversary proceeding exceeded one-third of the cost of the amount owed.

For Long Island families dealing with Parent PLUS loan defaults, this represents a fundamental shift. Parent PLUS Loans can be discharged in both Chapter 7 bankruptcy and Chapter 13 bankruptcy like other types of federal and private student loans. But you first have to file a lawsuit in your bankruptcy case called an adversary proceeding. In the adversary complaint, you’ll have to show the bankruptcy judge that repaying the loans would cause an undue hardship to you and your dependents.

The Parent PLUS Loan Crisis and New Solutions

Parent PLUS loans account for almost a quarter of new federal borrowing for undergraduates. And although they are just 6% of the $1.57 trillion in current federal student debt, these loans are problematic because they allow families to borrow without regard to their ability to repay. If a parent loan borrower defaults, the government can collect through wage garnishment and Social Security and tax refund offsets.

The 2024 policy changes offer hope for families caught in this financial trap. The attestation form was revised in May 2025 to include more detailed expense categories aligned with IRS standards and presumptions for future hardship (e.g., retirement age or chronic conditions). No major legislative changes occurred by July 2025, but the process remains borrower-friendly for federal loans. Steps: File Chapter 7 or 13 bankruptcy, initiate an adversary proceeding, submit the attestation (with supporting docs like tax returns and paystubs), and attend any hearings.

How Long Island Families Benefit from Chapter 7 Bankruptcy

For Long Island residents facing overwhelming debt, Chapter 7 Long Island bankruptcy proceedings now offer enhanced protection and faster resolution. Chapter 7 bankruptcy attorneys in Long Island helping clients eliminate debt, protect assets & gain a fresh start with legal guidance. This form of bankruptcy is particularly suited for individuals in Long Island with limited income and assets who cannot realistically repay their debts. If you are burdened by creditor calls, wage garnishments, or lawsuits, Chapter 7 bankruptcy can provide immediate protection through the automatic stay, halting most collection actions against you.

The automatic stay protection is particularly valuable for families dealing with Parent PLUS loan defaults alongside other financial pressures. Typically, a Chapter 7 Bankruptcy case takes about four to six months from the filing date until the final discharge order is issued by the court. Consequently, many unsecured debts, such as credit card balances, medical bills, and personal loans, can be completely eliminated or discharged. This process offers substantial relief for those facing overwhelming financial obligations.

Navigating Post-Bankruptcy Student Loan Options

Even after bankruptcy discharge, families with Parent PLUS loans have new alternatives. According to the Bankruptcy Reform Act of 1994, children of parents who have filed for bankruptcy cannot be denied federal student loans based on their parents’ bankruptcy history. However, parents who have filed for bankruptcy are ineligible for a PLUS loan if they are applying within five years of their bankruptcy discharge. PLUS loans are the federal loan option available for parents of children in college. If you are denied a PLUS loan due to your credit history or recent bankruptcy your child automatically becomes eligible for additional Stafford Loan funding.

This creates strategic opportunities for family financial planning. The existence of a bankruptcy discharge within five years can be overcome by other evidence of credit-worthiness. A parent borrower may also qualify for a PLUS loan with a credit worthy co-signor.

The Long Island Advantage: Local Expertise Matters

Working with experienced Long Island bankruptcy attorneys who understand both federal policy changes and local market conditions is crucial for maximizing family financial recovery. At the Law Office of Ronald D. Weiss, P.C., we believe in a personalized approach to each client’s case, carefully assessing their unique circumstances and requirements. Our goal is to deliver highly effective, compassionate, and cost-efficient representation.

The firm’s comprehensive approach addresses the interconnected nature of modern debt problems. We carefully consider various debt solution strategies, including bankruptcy, litigation, and negotiation, either as standalone options or as part of a comprehensive approach. By maximizing success while taking into account feasibility, risks, costs, and methodology, we strive to achieve the best possible outcomes for our clients.

Looking Forward: 2025 and Beyond

The landscape continues to evolve with pending legislation. H.R. 9931 – Student Borrower Bankruptcy Relief Act of 2024: Introduced in September 2024 by House Representatives Nadler and Correa, this comprehensive legislation would allow borrowers to discharge student loans through standard bankruptcy proceedings by eliminating the “undue hardship” requirement. Prominent lawmakers, including Senator Elizabeth Warren and Senate Majority Leader Chuck Schumer, are pushing for significant changes to student loan bankruptcy law. In a May 2024 letter to the Department of Justice, Warren and Senator Sheldon Whitehouse called for stronger action to encourage borrowers to seek relief.

For Long Island families currently struggling with Parent PLUS loan defaults and considering bankruptcy, the timing has never been better to explore their options. The combination of streamlined discharge procedures, enhanced bankruptcy protections, and evolving federal policies creates unprecedented opportunities for financial recovery. Taking action now, while these favorable conditions exist, can provide families with the fresh start they need to rebuild their financial futures and protect their children’s educational opportunities.

The key is understanding that financial recovery requires a strategic approach that considers both immediate relief and long-term planning. With the right legal guidance and an understanding of current federal policies, Long Island families can navigate these complex waters successfully and emerge with renewed financial stability.