Q: I need to know if it is possible to to remove or discharge my student loans in bankruptcy. I have read a lot of articles online regarding bankruptcy and student loans and am still fairly confused as to if bankruptcy will in fact discharge my student loans debt? I do have private student loans as well.
A: There is often times confusion around the topic of “Bankruptcy and Student Loans.” Every debt circumstance is different, so you should always get the services and advice of a professional bankruptcy attorney who can guide you in the correct direction for your personal needs. However, below is an explanation of (generally) how student loans are handled in bankruptcy.
The only way your student loan debt will be discharged in bankruptcy is to prove that your student loan debt imposes an undue hardship on you and your dependents. Again, the best way to determine if this is a possibility for you is to contact a bankruptcy attorney who is experienced with these types of cases.
Most individuals either file Chapter 7 or Chapter 13 bankruptcy, and depending on which you have filed your student loan situation may differ:
Student Loans and Chapter 7 Bankruptcy:
Chapter 7 is what most people think of when they think of “bankruptcy.” This is a liquidation bankruptcy, which will result in the discharge or elimination of all debts. Without proving that your student loans impose an undue hardship, you will not be able to discharge the student loans within this type of bankruptcy.
In this type of bankruptcy you will have to file a separate motion with the bankruptcy count and go before a judge to give your explanation as to why your student loans pose an undue hardship for you and/or your family. This is very difficult to prove, and fairly rare to be granted.
Student Loans and Chapter 13 Bankruptcy:
Chapter 13 is referred to and reorganization bankruptcy. In this type of bankruptcy one will receive a reorganization of their debts along with a payment plan provided by the bankruptcy court. In some cases if the payment plan is met for a specified number of years, all debts remaining after the payment plan term is fulfilled will be forgiven.
You can include your private student loans and federal student loans in the reorganization, however be aware that this often will make little difference if your debt I primarily comprised of student loans. If your debt on the other hand, is mostly comprised of other forms of debt, this type of bankruptcy could free up some money for you making it easier to make your student loan payments.
TheStudentLoanShark:
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