How a student-loan borrower got $155,000 in debt wiped out through bankruptcy using new relief guidance

• Alrena Dale, 61, got $155,000 in student loans discharged through bankruptcy.
• Biden's new bankruptcy guidance, aimed at easing the process for borrowers, made that possible.
• Some attorneys told BI that the new guidance is a big help, but more outreach would be helpful.

Alrena Dale, 61, had her six-figure student-loan balance wiped out after decades of payments. She's one of hundreds of borrowers who have received relief after new changes to the bankruptcy process.

Though Dale filed over five years ago, President Joe Biden's new bankruptcy guidance, which streamlined the information she needed to provide in order to qualify for relief, was a turning point in her case.

In August 2023, Dale was finally relieved of her $155,000 balance, according to documents reviewed by Business Insider.

"There were no words. I was excited. I cried," Dale, who'd attended an online business bachelor's and master's program but struggled to find employment in her field, told BI. She worked multiple minimum-wage jobs at a time to afford her student-loan payments alongside her monthly expenses. "I really honestly didn't believe it until I got my discharge papers."

The reason it was so difficult for Dale and many other student-loan borrowers to seek relief in bankruptcy court before 2022 is that borrowers had to prove an "undue hardship" standard, in which they had to show that they cannot maintain a minimal standard of living, that their circumstances aren't likely to improve, and that they have made a good-faith effort to repay their debt.

That standard was an extremely high bar for borrowers to meet. The Biden administration's guidance changed that by establishing clearer guidelines for borrowers to meet undue hardship, and it allowed borrowers to complete a self-attestation form, allowing the bankruptcy process to move quicker and avoid investigations into their backgrounds.

Some bankruptcy attorneys told BI that the new guidance has made student-loan bankruptcy much more achievable for borrowers, with some having seen quick success after decades of stagnancy. Still, they said many lawyers are reluctant to lean into the new process, and more outreach and education on navigating bankruptcy for student loans would help.

Dale said the overwhelming emotion she now feels is relief.

"Knowing that I don't have to go out and work a second job just to pay it back because they've removed it for me, I really can't thank them enough," Dale said. "I have no words because I'm just happy and grateful and thankful."

'It's given us so much hope'

Bob and Tammy Branson, a bankruptcy attorney and senior paralegal, respectively, successfully represented Dale in her bankruptcy proceedings.

Tammy said that over the past 25 years, it was nearly impossible to discharge their clients' student loans in bankruptcy — but after the new guidance, she said their law firm has successfully discharged over $1 million in student loans.

"Now we're actually getting people not just to the point of treading water, but we're getting them out of the water," Bob said.

Dustin Baker, a bankruptcy attorney in Iowa, has seen similar success with the new guidance. Baker told BI that before November 2022, he advised his clients that considering a student-loan discharge wasn't worth their effort because it was so difficult to achieve, and he didn't want to take his clients' money for litigation he wasn't confident would be successful.

But once the guidance was announced, Baker said he's eliminated student debt for about a dozen of his clients, with a few more in the pipeline. He said his "biggest excitement" with the new process is the self-attestation form, which directly tells borrowers the questions they need to answer to get approved for a discharge, making communication between the borrower and the government easier.

The Justice Department released new data in July on how the process was going since the new guidance was announced. It showed that 588 new cases were filed from October 2023 to March 2024 — a 34% increase from the prior 6-month period. New data BI obtained from Sen. Elizabeth Warren in October showed that nearly 900 borrowers sought out the process in fiscal year 2024, and 85% of borrowers who filed using the new guidance received a full or partial discharge.

Baker said his experience incorporating the new guidance into his work was "very easy," and he added that members of the Justice Department gave attorneys in his area training sessions. However, Tammy and Bob said more education and outreach would be helpful because some lawyers are unsure if the new process is worth it.

Still, it's clear the guidance works, and Tammy said she hopes that continues.

"It's given us so much hope," she said.

'I would've had to work another job'

The new bankruptcy process for student-loan borrowers still isn't perfect. Igor Roitburg, a former attorney and senior managing director at Stretto — a bankruptcy services and technology firm — told BI that the timeline for borrowers to receive a bankruptcy decision can still widely vary and that uncertainty is a roadblock for some borrowers and attorneys to participate.

"For them to invest time and effort into a new process that they're uncertain about if they don't see results for months and months and months, makes it hard for them to commit to the process and offer it as a global service to all their clients," Roitburg said.

Dale said she saw no other option but to file for bankruptcy, regardless of whether it would be successful. Once the new guidance was released, the self-attestation form allowed Dale to prove that her financial circumstances were unlikely to improve, qualifying her for relief.

She now works at a call center and said she can't afford to retire yet. If she had the opportunity to do things differently, she might have considered going to a trade school to avoid the student-debt burden.

"I'm just making the best of what I have to work with right now," she said, adding that if she didn't see success through bankruptcy, "I would've had to work another job just to pay the student loans."

Have you successfully discharged your student loans in bankruptcy? Are you struggling with the process? Share your story with this reporter at asheffey@businessinsider.com.