When it comes to addressing serious debt concerns, there are few debt relief options that are more powerful than the personal bankruptcy process. Under Chapter 7, a debtor can completely eliminate a majority of their debt and move on with their lives, while debtors who wish to retain their valuable assets while taking advantage of the bankruptcy process can file under Chapter 13.
Although claiming bankruptcy can certainly allow individuals to move past their debt challenges, you might be surprised to learn that not all debts are necessarily covered through the process. When it comes to filing bankruptcy, one of the most common questions we receive pertains to student loan and bankruptcy and whether they can be dismissed through the bankruptcy process. Fortunately we have just the information you need related to bankruptcy school loans.
So, can student loans be included in bankruptcy? Prior to 1998 and the passage of several new bankruptcy laws, it was actually fairly simple for debtors to discharge their student loan debt through the personal bankruptcy process. Since that time, however, things have become a bit more complicated. The law now requires that debtors prove “undue hardship” under the specific criteria listed below –
1. Continuation of student loan payments would force the debtor to live below a minimal standard of living and that –
2. Such a standard of living would continue for an extended period of time.
3. The debtor must have made a good faith effort to make payments on their loan. The law specifies a period of 5 consecutive years that payments must have been made.
If the debtor meets the criteria above then their student loan debt will be discharged and they will not have to continue making payments. It’s also important to note that debtor must first file bankruptcy before they are able to seek the “undue hardship” exception using the above criteria.
For more information on bankruptcy school loans, your best bet is to meet with a qualified bankruptcy lawyer in your area. Fortunately, finding a reputable lawyer is easy using our free bankruptcy evaluation form. For additional information on discharged bankrupt loans and for a complete guide on how to go bankrupt responsibly, please feel free to browse through our site.