If student loan debt is affecting your ability to fulfill your regular financial obligations, you may be considering bankruptcy as a way to get around the problem. Ten years ago, that would have been a viable option. Today, however, all of that’s changed. In general, it is just about impossible to discharge student loan debt under current bankruptcy law. That doesn’t mean that you shouldn’t bother filing for bankruptcy altogether. When handled properly, a bankruptcy can give you the fresh financial start that you need and make it easier for you to tackle that student loan debt. Furthermore, there are exceptions. In rare cases, it may be possible to discharge student loan debt through a bankruptcy.
Why Is Student Loan Debt Difficult to Discharge?
In years past, it was possible to discharge privately funded student loan debt through a chapter 7 bankruptcy. This loophole didn’t sit well with lenders, of course, and huge efforts were made on Capitol Hill to change it. Those efforts were ultimately successful. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 virtually did away with the possibility of discharging student loan debt through a bankruptcy. Under the new law, any student loan debt that qualifies for a tax deduction is not dischargeable.
Exceptions
There is technically still a way to discharge student loan debt through a bankruptcy, but a very limited number of people are able to do so successfully. If you can prove that the student loan debt puts an undue hardship on you and your family, you may be able to discharge it through a bankruptcy. The process is complex, and your finances will be put under a microscope. To increase your odds of success, it is imperative to have a skilled bankruptcy attorney by your side.
The Process
To qualify for an exception, you must first file a separate motion during your regular bankruptcy proceedings. From there, you will have to sit down with the judge to explain why your student loan debts place an undue hardship on you and your family. It is extremely difficult to satisfy the court about this matter. To do so, you must:
- prove that you cannot repay your student loans and maintain a minimum standard of living
- prove that your current financial situation is unlikely to change
- demonstrate that you have made a concerted effort to repay your student loan debt
In general, the only people who successfully discharge student loan debt through bankruptcy are permanently disabled and able to prove it to the court.
Alternative Options in Getting Rid of Your Student Loan Debt
If you are unable to discharge your student loan debts through a bankruptcy, there are alternative options that you can explore. A qualified bankruptcy attorney will be able to guide you through the process. One viable option is to include your student loan debt in a chapter 13 loan consolidation plan. Another possibility is to challenge the balance of your existing loans in court. In that case, your total balance due may be reduced, or you may qualify for more amenable repayment terms.
Contact a Bankruptcy Attorney Today
Unlike many forms of debt, there is no viable way to sweep student loan debt under the rug. The Higher Education Technical Amendments of 1991 eliminated statutes of limitations on this type of debt, which means that it can be collected indefinitely. The same act eliminated time limits for collections actions like wage garnishments and tax refund interceptions. In short, ignoring the problem will only make it worse. By contacting a qualified and experienced bankruptcy attorney today, you can explore your options for managing your student loan debt. This debt does not go away on its own, so the time to act is now.
Important Disclaimer: The information discussed above and throughout this website should not be relied upon to make any decisions without first speaking to a bankruptcy attorney. There are many intricate rules of law governing bankruptcy with many exceptions to the general rules that could change the advice given by an attorney based on the differing facts in each person’s special set of circumstances. THEREFORE, it is important to discuss any information contained in this website with one of our attorneys before taking any action or refraining from taking any action.
