Student Loans can be dischargeable in bankruptcy
You may have your federal student loan discharged in bankruptcy only if you file a separate action, known as an "adversary proceeding," requesting the bankruptcy court find that repayment would impose undue hardship on you and your dependents.
What circumstances do I need to prove to have my loan discharged in bankruptcy?
You must file for bankruptcy and demonstrate to the bankruptcy court that repaying your loan would cause undue hardship. This must be decided in an adversary proceeding in bankruptcy court. Your creditors may be present to challenge the request.
How do bankruptcy courts determine undue hardship?
The bankruptcy courts do not use a single test to determine undue hardship but may look at the following factors to determine whether requiring you to repay your loans would cause an undue hardship:
What happens to my loan if the bankruptcy court determines repayment would cause undue hardship?
It depends on the terms of the bankruptcy court’s determination. The terms may include one of the following:
What can I do if the bankruptcy court doesn’t discharge my loans but I can’t afford the payments?Many different repayment plans exist, and switching to a plan that’s a better fit is usually possible. Contact your loan servicer if you would like to discuss repayment plan options or change your repayment plan. You can get information about all of the federal student loans you've received and find the loan servicer for your loans by logging in to "My Federal Student Aid."
-From: https://studentaid.gov/manage-loans/forgiveness-cancellation/bankruptcy
Start first with StudentAid.gov to determine if and whether a repayment plan option or Public Service Loan Forgiveness is an option. If you decide you need to hire an attorney to analyze your student loan options or your options in connection with a bankruptcy case, please call our office to further discuss what options are available. We will start with a discussion of your facts, and then we will ask you to download the NSLDS data file from Studentaid.gov and fill out the online application in the link below for Student Loan Intake App, so that our office can fully review your facts, and your options with you.
What circumstances do I need to prove to have my loan discharged in bankruptcy?
You must file for bankruptcy and demonstrate to the bankruptcy court that repaying your loan would cause undue hardship. This must be decided in an adversary proceeding in bankruptcy court. Your creditors may be present to challenge the request.
How do bankruptcy courts determine undue hardship?
The bankruptcy courts do not use a single test to determine undue hardship but may look at the following factors to determine whether requiring you to repay your loans would cause an undue hardship:
- If you’re forced to repay the loan, you would not be able to maintain a minimal standard of living.
- There is evidence that this hardship will continue for a significant portion of the loan repayment period.
- You made good faith efforts to repay the loan before filing bankruptcy.
What happens to my loan if the bankruptcy court determines repayment would cause undue hardship?
It depends on the terms of the bankruptcy court’s determination. The terms may include one of the following:
- Your loan may be fully discharged, and you will not have to repay any portion of your loan. All collection activity will stop.
- Your loan may be partially discharged, and you will still be required to repay some portion of your loan.
- You may be required to repay your loan, but with different terms, such as a lower interest rate.
What can I do if the bankruptcy court doesn’t discharge my loans but I can’t afford the payments?Many different repayment plans exist, and switching to a plan that’s a better fit is usually possible. Contact your loan servicer if you would like to discuss repayment plan options or change your repayment plan. You can get information about all of the federal student loans you've received and find the loan servicer for your loans by logging in to "My Federal Student Aid."
-From: https://studentaid.gov/manage-loans/forgiveness-cancellation/bankruptcy
Start first with StudentAid.gov to determine if and whether a repayment plan option or Public Service Loan Forgiveness is an option. If you decide you need to hire an attorney to analyze your student loan options or your options in connection with a bankruptcy case, please call our office to further discuss what options are available. We will start with a discussion of your facts, and then we will ask you to download the NSLDS data file from Studentaid.gov and fill out the online application in the link below for Student Loan Intake App, so that our office can fully review your facts, and your options with you.