The Student Loan Bankruptcy Myth
It is very difficult, but not impossible to discharge student loan debt in bankruptcy. In limited cases, you can get your student loan discharged when filing bankruptcy. According to a study published in the American Bankruptcy Law Journal, at least 40 percent of borrowers who include their student loan debt in their bankruptcy filing end up with some or all of their student debt discharged.
Sadly, according to the same study “99.9 percent of bankrupt student loan debtors do not even try to discharge their student loans.” More student loan debtors should try to include their debt from student loans in their bankruptcy filing, especially in light of a new amicus brief filed by the NCLC and NACBA seeking to lessen the burden of debtors trying to discharge student loans based on undue hardship.
How to Determine Whether Filing Bankruptcy Will Help With Student Loan Debt
Different formulas are used specifically to test for your personal dischargeability of student loans — the most common of which is the “Brunner Test,” which is used by 9 of the 13 judicial circuit courts. Prior to 2005, the bankruptcy law allowed individuals to eliminate student loan debt much easier than it does now. The changes made to the bankruptcy code in 2005 placed restrictions on who can discharge their student loan debt when they file for bankruptcy. Most individuals don’t file for bankruptcy based solely on student loans, but in some instances, the amount of debt they carry including student loans is crushing, and if they prove the right elements, there is some hope they may qualify for a student loan bankruptcy.
Erasing Student Loan Debt Under the Brunner Test
The Brunner Test is a formula devised in the Federal case, Brunner v. New York State Higher Education Services Corp, where the debtor with the student loans shows the court that:
- You are having trouble maintaining a minimal standard of living based on your current income and expenses if you are forced to repay your student loans you’re your current conditions exists, and
- These problems may persist for a long period of time; and
- You made a good faith effort to repay the student loans while you could.
Under the Brunner test, if you can prove undue hardship, your student loans can be completely discharged. Again, being approved for a student loan bankruptcy is not easy, and many people cannot meet this burden of undue hardship, but only a qualified attorney can let you know what your chances are of having your student loans erased with a student loan bankruptcy.
Once you file your student loan bankruptcy case, student loan bill collectors are automatically barred from contacting you any longer regarding them—buying you necessary time to work with a specialist who can erase those student loan debts or put you in touch with professionals who can help consolidate your defaulted loans.
What If I Cannot Prove Undue Hardship?
If you cannot prove undue hardship, it is still possible to negotiate and make your student loan payments small and affordable. Chapter 13 bankruptcy is a process whereby the majority of your debts are discharged and the remaining debts are “reorganized” so that you can make payments that you can afford based on your budget for a period of between three and five years. Once your plan is over, you can attempt to discharge more of the student loans based on hardship.
Chances of Student Loan Bankruptcy Success?
Every person’s situation is different and the changes to the bankruptcy code have made it very difficult to discharge your student loans. Erasing student loans is usually not the only reason a person files for bankruptcy. The only way we can tell if you may qualify for a student loan bankruptcy is if you contact us for a free evaluation.
Where Do I Go From Here?
Simple. Fill out the contact form on the side of this page and you will be instantly connected to one of our expert attorneys who will find out what your options are free of charge. Don’t waste any more time with student loan debt collectors harassing you every day. Get proactive, contact us right now and we’ll do all we can to help make your life easier and get you a fresh start.
Is student loan bankruptcy possible for you? There’s only one way to find out–connect with an expert bankruptcy attorney for a fast and free bankruptcy consultation today!