When Can Student Loan Debt Be Discharged in Bankruptcy?

iStock_000014217415_LargeSo many Americans are struggling with student loan debt nowadays. I was tempted to write “young Americans” but that just isn’t true. People of all ages are struggling, because student loan debt is practically a 25 years to life sentence.

Unfortunately, no matter how much student loan debt resembles a plague, most people will not be able to get their student loan debt discharged in Chapter 7 bankruptcy. In order to do so, you would have to prove undue hardship, which has proven to be extremely difficult.

Student Loan Debt and Undue Hardship

In order to determine whether or not you qualify for undue hardship, most bankruptcy courts will use the Brunner test. To pass this test, you will have to meet all of the following requirements:

  • Poverty – The first step is to show that you do not have enough income to continue making payments on your student loan debt and still maintain a reasonable standard of living.
  • Persistence – Next, you have to show that your financial struggle is not a temporary dip, but rather a situation that is likely to endure for some time.
  • Good Faith – And finally, you will be required to prove that you have made an effort to repay your debt. If you never make a payment, and wait until the loan is in default, the court may not be inclined to vote in your favor.

Having dependents can greatly increase your chances of successfully proving hardship. If favor.

All or Nothing with Student Debt Discharges

If you manage to pass the Brunner test and are to receive a discharge of your student loan debt, the court will almost always consider the debt an all or nothing affair, meaning that your student loans will likely be completely discharged rather than just part of it.

What If You Cannot Get a Discharge?

It is very rare that people get their student loans discharged, so you may want to look into other options. A bankruptcy attorney may still be able to help you find a solution to student debt even if you can’t get a discharge.

For example, you may be able to negotiate with your lender. Rather than let the debt go into default and eventually be sold to collectors, many creditors may be willing to negotiate for much lower payment amounts or even a reduced principle. In some cases, you may be able to cut your overall student loan debt in half just through negotiating.

Call or fill out an online form today for a free consultation, and find out how the Law Firm of Kevin D. Judd may be able to help you achieve your goal of becoming debt free.



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