Discharged Bankrupt Loans

When it comes to claiming bankruptcy, one of the most common questions pertains to whether or not certain types of loans are dischargeable through the claims process. After all, loans are one of the major sources of consumer debt, so it makes sense that people want to know about discharged bankrupt loans. Although filing a bankruptcy claim can be tremendously effective for those who are looking to eliminate large portions of debt, there are certain types of loans that are difficult to discharge, with student loans being the most notable among them. Read on to learn more about student loan and bankruptcy.

It used to be that student loans were easily discharged through bankruptcy, that is, until a law was passed in 1998 that made it much more difficult. The law requires that debtors prove hardship under a certain set of criteria, or rules. Termed an “adversary proceeding,” the debtor must request hardship after their bankruptcy has been processed. In the adversary proceeding, the student loan creditors will be in attendance to challenge the request for hardship. In order to qualify for hardship, the debtor must satisfy the three tests listed below –

1.    Payment of student loans would prevent you from maintaining a “minimal” standard of living

2.    Such hardship would continue over a significant time period during the life of the loan

3.    You had made efforts to repay your loan prior to filing bankruptcy – for a period of at least 5 years.

If you are able to meet the criteria above then your student loan debt will be discharged and you will not need to repay your creditors. While this is good news for the debtor in the short-term, it’s important to note that qualifying for another student loan in the future will be much more difficult.

Of course, claiming bankruptcy on student loans isn’t the only tool you have when it comes to student loan payment relief. Consider the five options below as alternatives to bankruptcy –

•    Deferred payments on your loan

•    Student Loan Forgiveness

•    Student Loan Forbearance

•    Flexible Repayment Options

•    Student Loan  Consolidation

For more information on discharged bankrupt loans and bankruptcy school loans, please feel free to check out some of the other informative articles throughout our site. In addition to articles on how to claim bankruptcy, we also offer a free bankruptcy evaluation that you can use to determine if claiming bankruptcy is the right option.

Click on the following link to learn the answer to the question “Can you include student loans in bankruptcy.”