Can I File Bankruptcy to Rid Myself of Student Loans?
October 13, 2016 | STUDENT LOAN
The decision to file bankruptcy shouldn’t be taken lightly. It can have possible negative consequences on your credit, but sometimes, these negative consequences are much less severe than continuing to try and pay your current bills.
There are many bills and payments that can make living life nearly impossible for you and your family, but with the rising costs of education, student loans are often the largest monthly bill that needs to be paid. If you’re considering bankruptcy, you’re probably hoping that your massive student loans can be eliminated, but can bankruptcy really get rid of your student loans?
Student loans are not eliminated with a standard bankruptcy filing
In general, most people file under chapter 7 or chapter 13. There are some important differences between the two that an experienced student loan bankruptcy lawyer in Columbus, Ohio can walk you through. However, they do have one thing in common—neither one eliminates student loans.
Even if you file for chapter 7 because you’re able to show that you don’t have enough income to afford any repayment on debt, your student loans will still need to be repaid. This is because the bankruptcy code specifically states that student loans are not dischargeable. There are exceptions, but in order to meet the exception, your student loan bankruptcy lawyer will need to file a law suit against your student loan creditor and prove an undue hardship. For the most part, student loan creditors are very flexible when it comes to repayment plans because of their non-dischargeable nature. If you’re struggling to deal with your student loans, it’s worth your time to call your creditor directly. If you have a very low income, you may qualify for an income based repayment plan (IRB), or a pay as you earn plan (PayE). Otherwise, you may seek to defer payments until you’re able to make them.
The undue hardship exception
There is always an exception to every rule. Although your Columbus, Ohio student loan lawyer won’t be able to eliminate your student loans with a basic chapter 7 or chapter 13 filing, an additional separate adversary proceeding or complaint to determine dischargeability can be filed. The key to this filing is to prove undue hardship.
How do you prove that paying student loans has created an undue hardship for your family? In general, you must prove that:
- Repaying the loan wouldn’t allow you to maintain a minimal standard of living
- Financial hardship would ensue for a significant portion of the repayment period
- You’ve made a good faith effort to pay the loan before filing the complaint
If you attended a for-profit school, or if there was a breach of contract or deceptive practices, you may be able to support your case even further, increasing your chances of having your student loans eliminated.
How likely are you to prove hardship?
Because hiring a student loan bankruptcy lawyer in Columbus, Ohio can be costly, especially when you’re considering bankruptcy due to a lack of funds, it’s natural to wonder how likely you will be to make your case and have your student loans eliminated.
According to a recent study, analyzing bankruptcy filings in 2007, nearly 40 percent of people claiming undue hardship were able to eliminate at least some of their student loan debt as part of their bankruptcy proceeding. However, 99.9 percent of student loan debtors in bankruptcy never attempt to get a discharge. If you have student loan debt, be sure to speak with your attorney at The Nesbitt Law Firm about whether you should file a separate adversary proceeding to seek discharge.
The bankruptcy process is time consuming and confusing, whether you attempt to eliminate your student loans or not. Make sure you get the support you need by hiring The Nesbitt Law Firm, your Columbus, Ohio student loan lawyer. Contact us today for a free case evaluation.