Are Student Loans Discharged in Bankruptcy?
When filing for bankruptcy, it is important to understand that there are some types of debts that are difficult to be discharged. One type of debt that you might not be able to get rid of are student loans, although there are certain situations which might result in the cancelation of your student loans. The only way to determine if you can get rid of your student loans through bankruptcy is by talking with a qualified bankruptcy attorney who will assess your individual situation.
Proving That Debts are an Undue Hardship
When you go through the bankruptcy process, students loans might be discharged if you can prove that those loans “will impose an undue hardship on you and your dependents.” The problem is that it is very difficult to prove this undue hardship, and the courts use several tests to determine the hardship that the loans will be on you and your family.
Tests to Prove Undue Hardship
A common test used by the courts is known as the Brunner test, which looks for proof that you can’t maintain a “minimal” standard of living while paying student loans living expenses at the same time. This test is based on your current expenses and income, to see how a student loan payment would impact your situation.
The second portion of this test looks at the likelihood of a continuance of your current state of affairs during the repayment period. Additionally, the test considers whether or not you have made good faith efforts to repay the loans.
Keep in mind that it is very difficult to prove undue hardship right out of school, because you don’t have any payment history to show that you made a good-faith effort to pay the loans back.
How to Use Bankruptcy to Discharge Student Loans
If you talk with your attorney and determine that you can prove undue hardship, then it must be proved during the bankruptcy process. Some people assume that student loans can be automatically discharged by filing for bankruptcy, but the truth is that you will need to file a petition in order to get a determination for your individual situation.
In the situation where you have previously filed for bankruptcy and did not file the petition for an undue hardship determination, then it might be possible to address the bankruptcy again in order to file the proceeding.
If Bankruptcy is not the right option for your student loans, then I can go over several other options with you. The options for dealing with your student loans are complex and change frequently.
Here at Flippin Law, provide bankruptcy services to Yadkin, Surry, Wilkes and Alleghany Counties in North Carolina. Contact our office today to schedule a bankruptcy consultation: (336) 526-2280