Most people will tell you that student loans cannot be discharged in a
bankruptcy proceeding. While that's true in
most cases, it isn't true in
all cases. However, the circumstances required to make it possible are so
limited and narrow that it's not worth considering as an option for
your student loan solutions unless you're facing total and complete
First of all, the bankruptcy must be filed under Chapter 7 or Chapter 13.
It is not possible to get student loans discharged under any other type
of bankruptcy. The discharge is also not part of the main bankruptcy proceeding;
it requires a separate adversarial proceeding. While it's quite possible
to handle a standard bankruptcy on your own if you have circumstances
that are simple enough, it is very difficult to win an adversarial proceeding
without hiring a lawyer to represent you.
The next problem is that there are no hard and fast rules about discharging
student loans at any level of the federal and state court systems. There
is language that permits it if the loan recipient is in circumstances
that make it extremely unlikely that they will ever be able to pay off
the loan, but the ultimate decision is still at the discretion of a judge
and usually relies heavily on prior case law.
So what has prior case law established about student loan discharges in
bankruptcy? Certain conditions, like facing a total and permanent disability,
can certainly sway the opinion of a judge. For those who are working and
are simply struggling to make ends meet, however, the circumstances have
to be pretty severe for the court to consider discharging their loans.
The most commonly used standard in these judgments, the
Brunner Test, stipulates that debtors have to show that even a minimum student loan
payment will cause hardship in their life. While that's certainly
a situation that some people find themselves in, there's tougher criteria
that they also have to meet; an assessment of their future prospects to
determine if they will ever have a realistic chance of paying off the
loan or meeting the minimum terms under federal repayment assistance programs.
A bankruptcy solely for the purpose of discharging student loans is usually
a bad idea because of the impact it has on future ability to secure credit.
If you feel it is necessary to file for bankruptcy due to other circumstances,
however, the assistance of an experienced attorney can help to get student
loans included in the bankruptcy under the right circumstances.
Contact us to learn more.