Can I use bankruptcy to eliminate student loan bills? 27 Answers as of June 21, 2013

I graduated from college last year, and have not been able to find a job. My parents have been helping me pay for my student loans, but I can't pay these loans if I can't find a job! Can I use bankruptcy to eliminate student loan bills?

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The Salas Firm
The Salas Firm | Ron Salas
No, student Loans are one of the few items that may not be discharged.
Answer Applies to: Colorado
Replied: 9/29/2011
D T Pham Associates, PLLC
D T Pham Associates, PLLC | Duncan T Pham
No, student loans are not dischargeable in bankruptcy.
Answer Applies to: Texas
Replied: 6/3/2013
Bird & VanDyke, Inc.
Bird & VanDyke, Inc. | David VanDyke
Generally student loan debt is non dischargeable.
Answer Applies to: California
Replied: 6/21/2013
The Law Office of Darren Aronow, PC
The Law Office of Darren Aronow, PC | Darren Aronow
No, virtually all student loans are non-dischargeable unless you can prove a hardship. However, proving a hardship in itself is extremely difficult.
Answer Applies to: New York
Replied: 9/22/2011
The Law Office of Marvin Wolf
The Law Office of Marvin Wolf | Marvin Wolf
The standards to eliminate student loans in bankruptcy are extremely high and most people will not qualify. Usually it involves some form of permanent disability and the student having made payments for a number of years before becoming ill. The 2005 changes to bankruptcy laws made it even more difficult to eliminate this type of debt. There are strategies to help deal with this type of debt outside of bankruptcy. You can contact your Congressional representative or Senator to urge them to change the law so that this type of debt can be discharged in bankruptcy.
Answer Applies to: New Jersey
Replied: 9/22/2011
    The Law Offices of Katie M. Stone
    The Law Offices of Katie M. Stone | Katie M. Stone
    Most student loan debt is non-dischargeable in a bankruptcy. I suggest that you work with your lenders no a forbearance or deferment. Also, you can look into and apply for income based repayment for most student loans. Check with your lenders on their payback options. I hope you found this answer useful.
    Answer Applies to: Florida
    Replied: 9/20/2011
    Dan Wilson Bankruptcy
    Dan Wilson Bankruptcy | Dan Wilson
    Generally speaking, no. The standard is "hardship" and it is a very difficult standard to meet. One case I remember is a lawyer who became permanently disabled and was unable to work. She was also the primary caregiver for her disabled mother. If your loans are government loans you might apply for the Income Based Repayment Plan. Payment based on income from your last tax return. But the low payments don't reduce the loan balance. This is a huge problem and its going to get worse. There are billions (trillions?) of student loans out there that simply are never going to be repaid.
    Answer Applies to: Colorado
    Replied: 9/20/2011
    North Sound Law, PS
    North Sound Law, PS | Spencer Bergstedt
    Student loans are very difficult, but not impossible, to discharge in bankruptcy. To discharge a student loan you must show that payment of the debt "will impose an undue hardship on you and your dependents." Courts use different tests to evaluate whether you have an undue hardship. One common test requires a showing that 1) the debtor cannot maintain, based on current income and expenses, a "minimal" standard of living for the debtor and the debtor's dependents if forced to repay the student loans; 2) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and 3) the debtor has made good faith efforts to repay the loans. Not all courts use this test. Some courts will be more flexible, some less. If you can successfully prove undue hardship, your student loan will be completely canceled. Filing for bankruptcy also automatically protects you from collection actions on all of your debts, at least until the bankruptcy case is resolved or until the creditor gets permission from the court to start collecting again. In an effort to deal with the growing issue of people being unable to repay their student loans, two bills have been introduced in Congress in 2011. Both bills would restore the ability to discharge commercial student loans in bankruptcy proceedings.
    Answer Applies to: Washington
    Replied: 9/20/2011
    Law Office of Andrew Harris
    Law Office of Andrew Harris | Andrew Harris
    Student loans are not dischargeable in bankruptcy. If you are a recent graduate and don't have a job, they should be able to defer the payments. I would recommend talking to the student loan administrator and find out what your options are.
    Answer Applies to: Oregon
    Replied: 9/20/2011
    Eranthe Law Firm
    Eranthe Law Firm | Cate Eranthe
    Probably not. There are very few instances where student loans are discharged - not finding work is not one of them. Go see a knowledgeable local bankruptcy attorney and they can look into it for you. Also you can contact the student loan servicer and possibly get a hardship waiver for some period of time. The interest will continue to accrue.
    Answer Applies to: California
    Replied: 9/20/2011
    Law Office of Harry L Styron
    Law Office of Harry L Styron | Harry L Styron
    Student loans are non-dischargeable except in very specific circumstances. You would probably have to go for several years without being able to find work before discharge would be considered, and you would have to show that you sought work not only in your chosen field but in every possible area.
    Answer Applies to: California
    Replied: 9/20/2011
    Colorado Legal Solutions
    Colorado Legal Solutions | Stephen Harkess
    You cannot eliminate student loans through bankruptcy unless you are permanently disabled. You can force them into a payment plan for several yearsthrough a Chapter 13 filing, but student loans will survive the process and you will still have to deal with them after your plan is complete.
    Answer Applies to: Colorado
    Replied: 9/20/2011
    Theodore N. Stapleton, PC
    Theodore N. Stapleton, PC | Theodore N. Stapleton
    General no unless you file a chapter 13 and get a hardship discharge which is difficult to do.
    Answer Applies to: Georgia
    Replied: 9/20/2011
    Law Offices of Michael J. Berger
    Law Offices of Michael J. Berger | Michael J. Berger
    Short answer: no. Dischargeability of Student Loans in Bankruptcy 1. Overview The Bankruptcy Code provides that student loans are not discharged in any bankruptcy proceeding unless "excepting such debt from discharge would impose an undue hardship on the debtor." Section 523(a)(8). The test - undue hardship - is very difficult to meet. It is the debtor's burden to prove the undue hardship at trial. Undue hardship means an inability to maintain a "minimal standard of living," essentially forever. 2. The Procedure To obtain a discharge of student loans, a person must: a. File a bankruptcy proceeding, chapter 7, 11 or 13, and, b. During the pending bankruptcy proceeding, file a Complaint against the student loan lender (or lenders) asking the court to "declare" that repayment of the student loan will be an undue hardship on the debtor. Filing the Complaint begins an adversary proceeding. This is the same thing as litigation outside of bankruptcy. The lender is the "defendant" in the proceeding. The lender will file an "Answer" or other response to the Complaint. The Court will set a status conference and eventually set a trial date. During the interim between the filing of the Complaint and trial will be a "discovery period." The lender defendant will take the deposition of the debtor and possibly the debtor's other witnesses. The lender will request documents from the debtor including income and expense records and employment records. The lender may file various motions such as Motion for Summary Judgment. The time between the filing of the Complaint and trial varies but can be generally estimated to be six months to a year. Trial generally will take a few days. After hearing the debtor's witnesses and other evidence and the lender's response and its evidence, the Bankruptcy Court will rule and "declare" whether any or all of the student loans represent an undue hardship to the debtor. 3. Determining Whether There is Undue Hardship The Bankruptcy Courts use a three prong test called the Brunner Test to determine whether or not there is undue hardship. The Brunner Test (831 F.2d at 396) requires that the debtor prove all of the following: a. that the debtor cannot maintain, based on current income and expenses, a minimal standard of living for herself and her dependents if forced to repay the loans; b. that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and c. that the debtor has made good faith efforts to repay the loans. 3.1 The First Brunner Prong - Inability to Pay Now The first prong is the easiest to meet. The debtor must offer evidence at trial that repayment of the loan is not possible "based on current income and expenses." This is established usually by the debtor's own testimony and personal records. The debtor's testimony is that he has a job (or does not), makes x amount of money, and that amount is not enough to allow him to maintain a minimal standard of living. The lender will often argue that the debtor can get a better job, or work more hours, or cut back on expenses, get a less expensive place to live, and thereby pay some of the loans and still maintain a minimal standard of living. A minimal standard of living does not include private schools for children, putting money away for retirement, or supporting other family members or unrelated persons. 3.2 The Second Brunner Prong - Inability to Pay in the Future To meet the second prong, the debtor must prove at trial that "this state of affairs," i.e., his current financial condition, will continue forever essentially. The debtor will need evidence at trial that he will not make significantly more in the future than he is making now. The debtor can certainly get on the stand and say that his position is as high as he will ever get however that will generally carry little weight with the judge. This usually requires an expert in the particular industry. This prong obviously involves a lot of speculation but the burden belongs to the debtor. He must prove to the Bankruptcy Court with evidence at trial that things are never going to improve. The lender will certainly retain an expert who will likely testify that in this particular industry the debtor can be expected to make considerably more in the future. 3.3 The Third Brunner Prong - Good Faith Efforts to Repay the Loan The debtor must establish at trial that he has made a good faith attempt to repay the loans. The most basic part of this requirement is that the debtor show the court that he has attempted to reach some sort of arrangement with the lender which will permit reduced payments or a period of no payments. The United States Department of Education, William D. Ford Federal Direct Loan Program offers various repayment options for student loan debtors. One of these is the Income Contingent Repayment Plan. Systems of bankruptcy are designed to relieve the honest debtor from the weight of indebtedness which has become oppressive, and to permit him to have a fresh start in business or commercial life, freed from the obligation and responsibilities which may have resulted from business misfortunes. Essentially, once a student loan debtor is on an ICR plan, monthly payments are calculated on the basis of adjusted gross income, family size, and total amount of Direct Loan debt. This can give student loan debtors the flexibility and breathing room they need during difficult times. Direct Loan provides a handy calculator for approximating ICR plan payments. The calculator is located at www.ed.gov/offices/OSFAP/DirectLoan/calc.html. The maximum repayment period under an ICR plan is twenty-five years. If a debtor makes payments under an ICR plan for twenty-five years, and there are still amounts left owing, those unpaid amounts are forgiven. More information on ICR plans and other Direct Loan repayment options can be found at DirectLoan website or by calling them directly. It is pretty clear that failure to use the Ford Program Options will, by itself, prevent any portion of the student loan from being discharged. The Ford Program does not apply to many loans. The debtor must attempt to settle or otherwise resolve the issue with the other lenders before seeking a discharge. The debtor will need evidence of these efforts at trial. A statement by the debtor on the witness stand that "I tried" will be given little weight. The debtor needs names and dates and rejection letters are even better. Some courts have ruled that failure to make payments before filing the bankruptcy case is a factor against the debtor. 4. The "Partial Discharge" A relatively new development in the discharge of student loans is the "partial discharge." The Bankruptcy Court is permitted to determine that some portion of the total student loan debt is discharged. This occurs usually when the amount owed is huge, for example a few hundred thousand dollars or more. Applying interest to that amount means that the payments will be several thousand dollars per months for many years. The Bankruptcy Court may decide that x amount of the total is to be repaid and the rest discharged. Remember that the burden is on the debtor to show the court at trial what portion cannot be repaid.
    Answer Applies to: California
    Replied: 9/20/2011
    Law Office of Michael Johnson
    Law Office of Michael Johnson | Michael Johnson
    No. Student loans are very hard to be discharged. There are some options, but they are very difficult.
    Answer Applies to: Florida
    Replied: 9/20/2011
    The Schreiber Law Firm
    The Schreiber Law Firm | Jeffrey D. Schreiber
    Student loans are not dischargeable unless there is extreme hardship (like having the literal choice of buying food or paying the student loan) and you would have to prove that to the satisfaction of the court.
    Answer Applies to: California
    Replied: 9/20/2011
    Law Office Of Magnolia Zarraga
    Law Office Of Magnolia Zarraga | Magnolia Zarraga
    Unfortunately, no. Student loans are one of a few things that don't get eliminated in a bankruptcy. There is a way to do so, but it is very difficult and a long shot you have to show basically 1. that you cannot maintain, based on current income and expenses, a minimal standard of living if you are forced to repay the student loans; 2. there has to be some hardship (not only financial but usually medical) that will continue through the repayment period of the student loans; and 3. You have to show that you made good faith effort to repay the loans. Most people don't qualify. If you qualify you can't just get rid of it by filing bankruptcy you have to have your attorney file an adversary, which is basically litigation in bankruptcy and the lenders will put up a huge fight. So it'll be costly and you might loose unless you have an extreme hardship. Because you just graduated and you haven't found a job ask your lender about income contingent repayment plan or some other program to assist you until you find a job. The interest will likely still continue to accrue but at least it won't go into default. I know its hard to come to terms that you just graduated and you have to rely on mom and dad to pay your student loan, but if they can continue to help you, let them. You want to tackle this student loan so it doesn't grow to a ridiculous amount that you'll never be able to repay. You're not alone, there is a ton of people that are recently graduated and unemployed, keep looking, when you least expect it, you'll find a job and before you know it the job of your dreams. If you have other debt, you might consider filing a bankruptcy to get rid of your other debt so you can free up your money to pay down the student loan. Good luck.
    Answer Applies to: California
    Replied: 9/20/2011
    Diefer Law Group, P.C.
    Diefer Law Group, P.C. | Abel Fernandez
    No. Student loans are only discharged in a bankruptcy if you can prove extreme hardship. This has proven to be almost impossible. The only time I saw a court grant a discharge of student loans was to a quadriplegic. It is almost impossible to prove the tough standard necessary to discharge student loans.
    Answer Applies to: California
    Replied: 9/20/2011
    Law Office of Eric Ridley
    Law Office of Eric Ridley | Eric Ridley
    Under most circumstances, no. Student loans are not dischargeable in bankruptcy, under most circumstances.
    Answer Applies to: California
    Replied: 9/20/2011
    Burnham & Associates
    Burnham & Associates | Stephanie K. Burnham
    No. Student Loans are not dischargeable. Please talk to the loan company about deferring the loans through one of their programs.
    Answer Applies to: New Hampshire
    Replied: 9/20/2011
    Selleck Legal, PLLC
    Selleck Legal, PLLC | Stacey Selleck
    Student loans are typically not discharged through a bankruptcy.
    Answer Applies to: Michigan
    Replied: 9/20/2011
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