Former Bankruptcy Judge Warns Trump’s Student Loan Overhaul Could Trigger Wave of Personal Bankruptcies

A sign points to the U.S. Bankruptcy Court in Lower Manhattan, New York City.

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During her nearly three decades on the U.S. Bankruptcy Court, Judge Sarah Sharer Curley presided over many heartbreaking cases, including that of a 73-year-old woman who appeared before her in 2012 with a staggering student loan balance exceeding $584,000.

The debt, which originated in the 1970s, had accrued significantly over the woman’s public sector career. In her new book, The Price of Forgiveness: Debt, Bankruptcy, and the Future of Fairness in America, Curley details how the woman, who never earned a high income, ended up living in poverty on Social Security alone by the time she sought relief. Despite her circumstances, stringent bankruptcy laws make it incredibly difficult to discharge student loan debt.

As the first woman appointed to the U.S. Bankruptcy Court for the District of Arizona, Curley noted that this scenario is all too common.

“We allow the financial markets to take innumerable risks, yet we refuse to allow an individual to be forgiven for choosing to pursue an advanced degree,” Curley wrote.

Curley retired in 2014. In a recent interview, she discussed her book and the legal system’s frequent failure to provide struggling Americans with a genuine second chance. In 2025, personal bankruptcy filings surpassed half a million, representing an almost 50% increase from three years earlier, according to the Administrative Office of the U.S. Courts.

The following interview has been edited and condensed for clarity.

‘People are subject to many unexpected events’

Annie Nova: What do people get most wrong about those who file for bankruptcy?

Sarah Sharer Curley: There is a widespread assumption that individuals filing for bankruptcy are committing fraud, attempting to hide assets, or cheating creditors. Nothing could be further from the truth.

AN: And so why did people end up in your court?

SSC: People are often subject to unexpected and devastating events. While they cannot always plan for the next earthquake, hurricane, or natural disaster, the typical causes are more mundane. Usually, it is someone losing a job. It could also be an illness that becomes chronic, with medical costs escalating dramatically over a short period.

Student loans represent another major area of concern. Universities are charging more for basic degrees as well as graduate programs. The cost of medical school over four years alone can exceed $400,000.

Sarah Sharer Curley

Everardo Keeme, Photo Fusion Studio

AN: You write that many people who file for bankruptcy are not unemployed; they’re just living paycheck to paycheck. What does this tell us about our economy and labor market?

SSC: Despite the wage increases that many economists tout, a significant portion of the workforce consists of independent contractors. These individuals receive few benefits and possess few rights, as companies are not responsible for them.

Other individuals may be employed by a company but find that their wages or benefits are insufficient to cover their basic needs. Many are forced to work multiple jobs or for several employers on a weekly basis just to get by.

Although the unemployment rate may be low, the quality of employment remains subpar for many.

‘I found her credible’

AN: The story in your book about the woman in her 70s with the six-figure federal student loan balance really stood out to me. What happened in her case?

SSC: The federal government refused to agree to any settlement. As the presiding judge, I had to decide whether her debt would be discharged or not. However, the case law I was bound to follow was highly unfavorable toward discharging student loan debts, leaving me with very little flexibility to grant her relief.

However, I credited her with seven years of public service helping troubled teens in San Diego County. Since individuals in certain public service roles only have a 10-year repayment period, this meant she would only need to repay the debt for three more years.

AN: Wow. Why wouldn’t the federal government agree to any settlement with her?

SSC: The federal government retains private law firms to represent it in bankruptcy court, granting these firms a significant degree of discretion in how to proceed. Consequently, some law firms take highly aggressive positions.

In the case of the woman in her 70s, the law firm attorneys were skeptical when she claimed to have no assets and relied solely on Social Security. However, they failed to conduct an adequate investigation. I found her to be entirely credible.

‘Harder to reach a settlement’ on student loans

AN: Under President Joe Biden’s administration, it reportedly became easier for federal student loan holders to get their debt discharged in bankruptcy. What’s the current situation like?

SSC: During the Biden administration, the U.S. Department of Education made attempts to work out manageable repayment plans for borrowers unable to pay their debts. There was also a possibility that the department would agree to forgive at least a portion of the student loans.

However, after the Education Department was gutted in 2025, there were few, if any, employees left who could approve debt modifications through the offered programs. Consequently, reaching a settlement with the Department of Education has become significantly more difficult.

Lauren Harms, Intrepid Literary

AN: In your book, you describe President Donald Trump’s “big beautiful bill,” which passed in July 2025, as an “attack” on student loan borrowers. How so? Do you expect the new law to drive up bankruptcy filings?

SSC: The bill established unrealistic federal loan caps for students. Consequently, if a student must take out a loan from a private financial institution that is not federally guaranteed, the loan is often provided at a much higher interest rate.

For example, if a student needs a $300,000 loan to attend medical school and has a lower credit score, their interest rate could jump to 16%. This would lead to a monthly payment of $5,017 over 10 years, amounting to $302,040 in interest alone.

These financial burdens are unsustainable for most individuals, and the rate of bankruptcy filings will most likely increase as a result.

Many bankruptcy filers ‘feel they have failed’

AN: You write that medical debt is another major reason people need to file for bankruptcy. Can you say a little more about this?

SSC: Many individuals who appeared before me suffered from chronic illnesses. Chronic diseases present a unique challenge because a person can only discharge the debt they owe at the very beginning of the bankruptcy case. Much like a chronic illness, the medical debt continues to mount day by day for years to come.

Many individuals are traumatized when they file a bankruptcy case.

Sarah Sharer Curley

Former U.S. Bankruptcy Court judge

AN: You write that the bankruptcy process is “tortuous” for most individuals. How so?

SSC: Following dramatic changes to bankruptcy law in 2005, individuals are now required to jump through numerous hoops to obtain relief.

While there was no evidence to support the belief that individuals were frequently committing fraud or filing for bankruptcy every few months, the creditor lobby successfully pushed to make bankruptcy laws more pro-creditor. The complex forms and numerous hearings required keep individuals in a perpetual state of stress.

AN: How does filing for bankruptcy affect people emotionally?

SSC: Many individuals are deeply traumatized by filing for bankruptcy. They grew up believing that if they simply worked harder, they could solve their financial problems. However, when they face losing their homes, cars, or businesses, they are forced to turn to bankruptcy.

Many individuals view their inability to resolve their financial troubles as a moral failure, feeling as though they have personally let themselves down.

AN: What was it like for you, day after day, seeing people under the pressure of insurmountable debt?

SSC: At times, at the conclusion of a hearing, after I had rendered my decision, I would explain to the individual that under the current law, I could not provide them with the relief they desperately needed. I would tell them that the law needs to be changed. We are willing to give breaks to large financial institutions and corporations, and it is time we do the same for individuals.

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