Student Loans & Personal Bankruptcy
Bankruptcy: Can it knock out your student debt?
If you have a debt problem, bankruptcy can seem like a good possibility.
Bankruptcy is a legal way for people who can’t pay their debts to
get a “fresh start” by temporarily or permanently stopping
your creditors. Bankruptcy works, it is legal and you can do it by following
a simple process – either with the help of a lawyer or a paralegal
But if you have a student loan, bankruptcy may not be the solution you
are looking for. It is possible that bankruptcy could get your student
loan forgiven but it is not likely. Most of the time student loans are
not forgiven when the borrower files for personal bankruptcy. In fact,
for many borrowers, filing bankruptcy made things worse because during
the proceedings, loan payments were not made. As a result the amount owed
by student debtors who declared bankruptcy was even higher by the time
they had to repay.
But it is possible, in certain cases for bankruptcy to get student
If you file Chapter 7 or Chapter 13 bankruptcy, you may
have your loan discharged in bankruptcy only if the bankruptcy court finds
that repayment would impose undue hardship on you and your dependents.
This must be decided in an adversary proceeding in bankruptcy court. Your
creditors may be present to challenge the request. The court uses this
three-part test to determine hardship:
• If you were forced to repay the loan, you would
not be able to maintain a minimal standard of living.
• There is evidence that this hardship will continue for a significant
portion of the loan repayment period.
• You made good-faith efforts to repay the loan before filing
bankruptcy (usually this means you have been in repayment for a minimum
of five years).
Here’s the bottom line:
If you are unable to prove any of the above, your loan
will not be discharged.
On the other hand, if the bankruptcy court discharges your loan, you will
not have to repay any portion of your loan, and all collection activity
In the best of conditions, bankruptcy is the debt solution of last resort.
This is even more so for holders of student loans.
Call today or fill out our form
To find out more about the alternative solutions to bankruptcy,
please complete this simple form. Or call toll
free Monday thru Friday 12pm to 6pm EST at Toll Free (866) 560-8585.