Overview of bankruptcy and student loans
Does bankruptcy cover student loans and medical bills? Can I file bankruptcy on federal student loans? Yes. If you do succeed to prove undue hardship and manage to declare bankruptcy on all your student loans, the amounts will be partly discharged, restructured, or fully discharged. In case they’ve been restructured, you will be offered new repayment terms that you will find easy to handle. Notably, students who attended a for-profit school might be able to raise a defense concerning the practices of the institutions. Moreover, if you have proof that there were deceptive activities or a breach of contract, you will have the chance to convince a judge to discharge the student loan.
Does Bankruptcy Clear Student Loans
Are student loans forgiven in bankruptcy? This is one of the most common questions that college students ask. Bankruptcy clear student loans in complex but applicable ways. Public Service Loan Forgiveness is facing the threat of elimination. The federal loan repayment programs for students, on the other hand, are expected to face a significant reconstruction. Therefore, borrowers of student loans have a lot of new information to digest. Student loans cannot be discharged in bankruptcy. However, if certain conditions are met, the situation is possible. Notably, a majority of borrowers will not be able to wipe out or discharge student loan debt in both Chapter Seven and Chapter Thirteen bankruptcy. But if you can assure that repaying the student loans will lead to undue hardship on your side, it is possible to get rid of the loans in bankruptcy.
Can student loans be discharged in bankruptcy?
Bankruptcy is never an easy process, but it can be more difficult if you have a student loan. In fact, you can only discharge a student loan through bankruptcy by proving undue hardship. This essentially means that you have to prove that you are entirely unable to pay back your loan. The courts, however, are given the room to interpret and determine your eligibility. The tests used to determine undue hardship vary between different courts. Regardless of the test applied in making this determination, most courts of law remain reluctant to discharge the loan.
A majority of courts acknowledge undue hardship tests in the view that you either qualify to get the whole amount discharged, or you don’t. Most of the time, courts use the Brunner Test to evaluate hardship. The standard allows you to discharge the student loan provided you meet these three factors:
- Basing on your income and expenses, you need to be unable to maintain the minimum living standard for yourself and those who depend on you if you pay the loan.
- Your current circumstance is likely to persist for the whole period of the loan.
- Good faith. You need to have made attempts to repay the student loan in good faith.
It is essential that you understand how to file bankruptcy on student loans.
Can you declare bankruptcy on student loans? How It Works
First, you have to begin by finding a lawyer. While you don’t necessarily have to go through an attorney in filing bankruptcy on federal student loans, the process can be incredibly complex if it involves student loan. Doing it by yourself could lead to incorrect filings, consumption of extra time, and eventually a lost case. If you don’t have a lawyer to help you in declaring bankruptcy to avoid student loans, don’t worry. You can get a good one via the American Bar Association. You only need to ensure that the lawyer you choose specializes in bankruptcy and has positive reviews.
If you find it uncomfortable working with a particular attorney for whatever reason, you are at liberty to find another ideal one. You don’t have to stick with the first lawyer you meet. Furthermore, depending on your situation, you may be eligible for an attorney at no charges via the Legal Services Corporation.
Next, your attorney will help you choose on filing for either form of bankruptcy (Chapter Seven or Chapter Thirteen). For Chapter 7, you have to confirm that your disposable income is too small to clear your debt. Most debt that is unsecured can be wiped out, and the student loan may qualify for discharge in three to five months. You can file for Chapter 13 if you have some income that you can use to repay part of the debt. The debt may be restructured, and part of it will have to be repaid. It may meet the qualifications, but the repayment will just be restructured and not discharged.
Another important step that you should take alongside your lawyer is filing the adversary proceeding. Signing this petition is part of the process which is unique to student loans and bankruptcy. Notably, you can’t proceed with the next steps of student loan bankruptcy without passing through this step. Once you’re done with filing the paperwork, your lawyer will advise on what happens next. The actions taken may vary with your current situation and the form of bankruptcy you choose to proceed with.
Can student loans be included in bankruptcy? What to consider
Is it possible to file bankruptcy on any form of student loan? Maybe. Should you take the steps? That will depend on you. Generally, bankruptcy clears student loans using a complicated, extensive and intrusive process. It may be impossible if not difficult to discharge these loans through bankruptcy, it would be advisable to steer clear of considering the option in the first place. It is usually considered a drastic method of debt resolution and can be avoided through simple solutions that may not necessarily be obvious if they involve a huge student loan debt.
There are also numerous solutions that can substitute bankruptcy. For instance, student loans come with provisions like income-driven repayment, as well as deferment or forbearance. You’re also at liberty to apply for forgiveness via an income-driven plan of repayment or the Public Service Loan Forgiveness. The latter is available to individuals who work for specific public service corporations including non-profits and government agencies.
Consult with your lender if you are still asking yourself why are student loans not dischargeable. They may be having a hardship program you didn’t know about. Before opting for bankrupcy and student loans or going against a system that is made not to discharge your loan, ensure that you research on other options for debt payment that relieve you of the student debt. So you have the right answers whenever someone asks you ‘can bankruptcy help with student loans?’