Student loan debt can be overwhelming, especially for new graduates looking for work. These loans represent a serious financial burden that is not easy to overcome. If you find yourself being crushed under these debts, you may be wondering if student loan bankruptcy can help with your situation.
Can Student Loan Bankruptcy Help Me?
With many types of debts, called dischargeable debts, an individual can file for Chapter 7 bankruptcy, in which their liquid assets are sold in order to pay creditors to relieve some of their debt, with the rest being discharged. However, federal student loan debt is a different situation. In almost all circumstances federal student loan debt is nondischargeable, which means bankruptcy cannot help. This is thanks to a special federal exclusion that was put in place with the 1998 Amendments to the Higher Education Act of 1965. This change made it easier to qualify for student loans, but in turn made them harder to get rid of through bankruptcy.
So Is There Any Way for Bankruptcy to Help with Student Debt?
There is one way to potentially get student loans discharged through Chapter 7 bankruptcy. If a borrower can prove in court that paying back student loans would cause “undue hardship” then they can have their debt discharged. In order to qualify for “undue hardship” you must pass the Brunner test, which will involve the court assessing these three things:
- Student loan payments are making it difficult if not impossible to maintain a basic standard of living.
- There are ongoing conditions in your life that will make it hard to repay your student debt from now into the future.
- You made every possible effort to repay your student loans.
Only under these circumstances will student loan bankruptcy be possible. The burden of proof will be on the borrower to show that there is reasonable evidence that they will never be in a position to repay what is owed.
If you feel like this is the right path to take, it is critical to seek the legal expertise of an experienced bankruptcy attorney to help make a strong case for undue hardship. The NJ bankruptcy attorneys at Schneider Freiberger, P.C. can help you understand your options regarding student loan bankruptcy in a timely and inexpensive manner.