Personal Injury Lawyer
Bankruptcy lawyers receive daily calls from people who are in debt because of a student loan, have defaulted on it, and would like to know if bankruptcy is an option. Student loans are one of the most difficult forms of debt to discharge in the bankruptcy process. In a majority of cases, a student loan will remain after bankruptcy has been filed by a debtor. That being said, just because it is difficult does not mean it is impossible or cannot be done at all.
Who Might Qualify?
In 99% of bankruptcy cases, student loan debt will not be included in the filing. However, about 40% of those who do request relief are granted partial discharge. If it can be proven that paying off the debt will result in undue hardship to the individual or their dependents, the likelihood of student debt being discharged through bankruptcy increases. There is no exact definition of undue hardship. Many courts will use the Brunner standard, which uses three parts to determine whether a debt should be discharged:
- The debtor will be unable to maintain a basic, or minimal, standard of living based upon their current income and expenses if they are required to pay their student loans.
- The debtor’s financial situation will likely continue.
- The debtor has made good faith payments or the effort to pay.
An example of a person who might qualify to have their student loan debt discharged in bankruptcy is a middle aged person who has a family, makes a little more than minimum wage, and has little to no opportunities for advancement. In this case, the court might find that this person has maximized their earning potential and cannot pay their loans while living a minimal lifestyle.
Is a Bankruptcy Lawyer Needed?
Discharging student debt will generally require extensive time and extra steps than a standard bankruptcy. This area of the law is complicated, which means you should consult with a bankruptcy lawyer for help. An adversary proceeding will need to be filed. This is a separate process and basically amounts to an individual suing their creditors.
The School You Attended Does Matter
Contrary to what many people believe, not all student loans are the same. Some borrowers will be surprised to realise that because of where they went to school, they can discharge their student loans with Chapter 7.
You might wonder why this is so. Current laws about bankruptcy and student loans only apply to accredited schools that meet the federal requirements as an eligible education institution. If you attend a school that was not accredited or did not meet the federal requirements for a higher education, your debt might not be considered a student loan. In this case, you might be able to have the debt discharged through bankruptcy.
Schools that might fall into this, include:
- For-profit organizations
- Unaccredited schools
- Trade schools
Although a student might take out a loan to cover this schooling, the debt might be dischargeable. A lawyer can review your case and help you to better understand your options.
Other Factors
There are also other factors that need to be taken into consideration. At the time you received the loan, you must have met certain requirements to be considered an eligible student. The loan must also have been used for qualified educational purposes. These factors must be considered.
A lawyer, like a bankruptcy lawyer from The Law Offices of Ronald I. Chorches, can review your educational history, investigate the school and it’s accreditation, and review the details of your loan. Call a law firm today for more details.