It’s very unlikely for student loan debt to be forgiven in a bankruptcy. It is possible, but the standard is extremely hard to meet.
You must prove what is called an undue hardship. First, you have to prove that your current level of income is insufficient to support you and your dependents if you are forced to pay back the student loan. Second, you must prove that there are circumstances which exist that would lead the court to believe that you are not going to be able to repay the student loan during the period the loan is set to be repaid. Third, you must show that you have made good faith efforts to repay the loan.
Bankruptcy courts determine hardship based on the factors that are mentioned above: income, inability to pay the loan in the given time period and good faith effort.
The court has two options if it is determined that a payment would cause undue hardship. (1) The judge is able to discharge all your student loan debt, or (2) the judge is able to discharge part of your debt and require that you pay back the rest.
There are multiple programs available to aid with the repayment of student loans. One of the options is to apply for an income-based repayment plan.
Many people believe that student loans don’t have to be listed in a bankruptcy, or believe that they are able to be discharged, and both of those are typically false. First, we have to show the court that the loans exist by listing them on the bankruptcy, and, second, it’s extremely rare for the court to determine that you qualify under the undue hardship standard in order to discharge your student loans. Most of the time, student loans survive the bankruptcy and will have to be repaid, either under the current payment plan or through an alternative such as the income-based repayment option.
For more information on Student Loan Discharge In A Bankruptcy, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (937) 247-6447 today.