Student Loans in Bankruptcy Explained
If you are struggling with overwhelming student loan debt, one of our lawyers can explain your bankruptcy options.
The belief that student loans in bankruptcy are never dischargeable is just plain incorrect.
You actually can get your student loan discharged in bankruptcy in some limited cases. However, for most people chapter 13 bankruptcy will provide the most immediate relief of overwhelming student loan debt without needing to worry about the dischargeability issue at all.
In 2011 Jason Iuliano published a study reporting that at least 40 percent of borrowers who do include their student loans in their bankruptcy filing end up with some or all of their student debt discharged. The biggest issue is that the Internet is rampant with rumors that have almost all borrowers thinking there’s no chance to have their student loans discharged, so they don’t try. Iuliano’s study reported that only about 0.1 percent of consumers with student loans attempt to include them in their bankruptcy proceedings.
If life has left you in a position where you simply have no hope of repaying your overwhelming student loan debt, you need to contact a bankruptcy lawyer specialist at the Crossley Law Offices to learn about student loans in bankruptcy.
One of our lawyers will review the following key points with you:
- If you pass the Brunner test: Current bankruptcy law exempts education loans and obligations from eligibility for discharge unless doing so would cause the consumer undue hardship. The problem is that undue hardship is not defined within bankruptcy law, leaving the bankruptcy courts to decide what this means.
Many Courts use what’s called the Brunner test to determine if requiring a consumer to continue to be responsible for an education debt would cause him or her undue hardship. There are essentially three criteria a consumer has to meet under the Brunner test.
First, continuing to pay the loan must cause the borrower to be unable to sustain a minimum standard of living. Second, the borrower’s financial situation must be unlikely to change in the future. Finally, the borrower must have made a good-faith effort to pay his or her loans.
If you meet these criteria, one of our bankruptcy attorneys can file an adversary proceeding for you (which is essentially a lawsuit within the bankruptcy case itself) seeking to have your student loans discharged.
However, for most borrowers with student loans in bankruptcy the far simpler route is to use chapter 13 bankruptcy to create a 5 year (60 month) payment plan, which the borrower can reasonably afford without needing to worry about whether or not the student loan service company will approve the monthly payment. For more information on how to use chapter 13 bankruptcy to effectively deal with overwhelming student loan debt contact one of our Massachusetts bankruptcy lawyer specialists now.