Student loans
Bankruptcy provides relief from many types of debts, namely unsecured debt in any form. There are several types of debt that will not get discharged as easily as unsecured debt. One example of debt that is not dischargeable is student loan debt.
The general rule is that student loans will not get discharged in your bankruptcy. This seems unfair at first glance, but the rationale behind this rule makes sense. If student loan debt could be discharged how many companies would lend students money for education expenses? Probably not many. The policy allows the relatively easy lending of money to educate individuals. Allowing people to receive money to pay educational expenses and then turn around and discharge that debt in a bankruptcy upon graduation would debilitate our system of higher education and would simply be unfair to those who lend money. Therefore to promote this idea the federal government implemented this rule.
Almost every aspect of our laws contains several exceptions and limitations. There is a very narrow exception in regard to student loans. The courts have dubbed this the “undue hardship” exception. This exception is very difficult to prove. The debtor must show extreme reasons why the student loan cannot be paid. Including the debtor is not able to live at a “minimal” standard of living due to the student loans, the debtor has made a good faith effort to pay, and facts indicate these extreme circumstances will last throughout the life of the repayment period. The process for proving undue hardship is done via an adversary hearing within your bankruptcy. At the proceeding the judge will determine whether such an undue hardship exists to allow a discharge of student loans.
It is best to just stick with the general presumption in regard to student loans. Student loan debt is probably not going to get discharged in your bankruptcy. The undue hardship exception as mentioned above is very difficult to prove that such conditions exist.
