Is It Possible to Get My Student Loan Discharged in My Bankruptcy?
May debts can be discharged in a Chapter 7 or Chapter 13 bankruptcy, such as medical bills, credit card bills, automobile deficiency balances and collection accounts. Some of these debts are a hindrance to one's financial freedom and growth.
Student loans, however, typically present a different scenario. Students who cannot repay this loan for various reasons are in trouble not just because of their inability to repay it but because it cannot be discharged through bankruptcy (in most instances). In other words, federal and private student loans cannot be canceled through bankruptcy.
The good news is, there are some circumstances that can change this scenario and help students free themselves from debt related to education. Talking to a student loan lawyer can go a long way in bringing this plan into reality. The right lawyer will talk with their clients and create a long-term scheme to discharge student debt while considering the client's total debt, current income, and debt type.
Student loan debt can be seen as a barrier to one's financial freedom. However, this is not always the case. By working with an experienced lawyer, students can now get their loans discharged if they could prove that being forced to repay their student loans is an undue hardship.
Proving Undue Hardship
In order to get a student loan discharged during bankruptcy, it is required that the student prove his or her hardship to repay along with plenty of evidence. The term undue hardship simply means that it is a burden for the student to repay the loan. As a screening criterion, the bankruptcy court will use the Brunner test to prove eligibility for loan discharge such as:
• The monthly payment makes it impossible for the borrower to have a minimal standard of living.
• The current circumstances make it impossible to earn the required amount.
• The borrower has tried in good faith to negotiate lower payments or pay the minimum amount.
Private vs. Federal
Private student loans are more likely to pass the Brunner test as these loans are positioned such that it is difficult to negotiate for lower payments. However, federal student loans are less likely to pass the test because such loans expose the borrower to a wide array of repayment options, some of them needing a payment that most borrowers can afford. Only in special circumstances, such as unemployment or disability, that the payment plans are eligible for recalculation.
Can You Get Student Loans Discharged?
The answer is, certainly yes. Some situations call for complete student debt cancellation. Such situations include, but not limited to:
Disability –Borrowers who have become disabled after getting their degree and are unable to pay their bills or pay towards their minimum monthly payment can file a request for their loans to be discharged, be it a private loan or federal.
Closed Schools—Borrowers whose institutions are closed before their degree is delivered can become eligible for loan forgiveness.
Fraud –Any misrepresentation by the college in which the borrower got admitted can be construed as a reason for filing for loan forgiveness. In such a case, the college is considered to have falsely certified the borrower to be eligible for a student loan.
If you are having trouble paying your student loans, please contact us at Wood & Brewer, and we can make a plan of action together!