When people file for bankruptcy, the face of the problem is often an ordinary life event gone wrong — a job loss, chronic illness or a mountain of student debt. In a new book and interview, former U.S. Bankruptcy Judge Sarah Sharer Curley argues that current rules leave many Americans trapped, even when they meet the stringent legal tests for relief.
Why this matters now
Bankruptcy law has become harder to navigate since major reforms in 2005, and recent federal policy shifts in 2025 have made settlements for federal student loans rarer. For borrowers, patients and anyone one paycheck away from disaster, those changes have immediate consequences: higher monthly payments, longer repayment timelines, and fewer avenues to reset financially.
Curley, who served nearly 30 years on the bench in Arizona and is the author of The Price of Forgiveness: Debt, Bankruptcy, and the Future of Fairness in America, has seen the effects up close. In her account, a number of cases underscore how the system treats individual debtors differently than large lenders and corporations.
Stories from the bench
One case that stayed with Curley involved an elderly woman whose federal student-loan balance — originating decades earlier — had ballooned to more than half a million dollars. The borrower, now living on Social Security and barely scraping by, asked the court for relief. Curley says she found the woman believable, but the judge’s discretion was constrained by precedent and the government’s aggressive representation.
After reviewing the record, Curley credited the borrower for seven years of qualifying public-service work, which reduced the time she would be required to repay under certain programs to three additional years. Still, the federal representatives in bankruptcy did not accept a settlement and challenged the woman’s financial claims — a stance Curley says reflected the latitude that some law firms retain when representing government creditors.
‘Unexpected events’ push people into court
Curley stresses that most filers are not fraudsters or serial abusers of the system. Rather, they are people hit by unforeseen events: layoffs, catastrophes, or a sudden escalation of medical bills. She notes the growing cost of higher education — including four-year medical programs that can run into the hundreds of thousands — and how that debt compounds long after graduation.
Employment figures alone mask the quality of work. Many Americans are employed as independent contractors without benefits, or they cobble together multiple jobs to make ends meet. The result: paycheck-to-paycheck lifestyles that collapse when a single shock arrives.
How policy changes changed the landscape
Several policy shifts over the last few years have altered the practical availability of relief for borrowers and patients.
- 2005 bankruptcy reforms created additional procedural hurdles and documentation requirements that lengthen and complicate cases.
- Education Department programs that once allowed negotiated modifications or partial forgiveness became harder to access after staffing reductions in 2025, Curley says.
- A federal law enacted in 2025 introduced new loan limits and created conditions that can push borrowers toward higher-cost private loans when federal caps are exceeded.
Those shifts mean that borrowers who might previously have reached a negotiated solution now face longer waits and more rigid positions from federal representatives. Curley warns that higher interest rates on private student loans, combined with stricter caps on federal aid, can make repayment obligations — sometimes several thousand dollars a month for graduate degrees — impossible to sustain.
Medical debt and chronic illness
Medical expenses are another major driver of bankruptcy filings. Curley points out a key structural problem: bankruptcy discharges generally account for debts that exist at case opening, but chronic illnesses create ongoing, accumulating costs. That dynamic can saddle a person with new bills even after a discharge, undermining the relief bankruptcy is supposed to provide.
The emotional toll is significant. Many filers describe bankruptcy as shameful or feel they’ve failed personally, even when external circumstances beyond their control pushed them there. Curley recalls hearing that sense of moral defeat repeatedly in the courtroom.
Practical takeaways for readers
- For borrowers: Be aware that federal loan relief options have narrowed in practice; documentation and persistence matter, but outcomes may depend on agency capacity and legal precedent.
- For people with medical debt: Bankruptcy may help with existing balances, yet ongoing medical costs can re-create financial distress — long-term planning and advocacy for systemic reform remain important.
- For policymakers: Curley argues the system favors institutions over individuals; changes could include clearer paths for student-loan discharge and more responsive loan-modification staffing at federal agencies.
Why judges feel constrained
Curley says judges often see firsthand how the law limits humane outcomes. After issuing decisions, she sometimes told debtors that she wished the statute allowed for broader relief. Her view: while large financial actors routinely receive regulatory and market breaks, individuals confronting overwhelming debt deserve more realistic routes to financial recovery.
Her account offers a courtroom perspective on how legal rules, agency capacity and private-law firm practices combine to shape who gets help — and who does not. That interplay matters now because recent federal policy changes have tightened the room for negotiated solutions, raising the odds that more households will reach the brink.
As the national conversation about debt continues, Curley’s book and experience underscore a simple question for voters and lawmakers: should the system that shields big institutions also do more to allow personal financial second chances?
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Jordan Keller specializes in analyzing the US financial markets. With concrete recommendations, he helps you secure and boost your investments by providing strategies that adapt to market fluctuations.