If I File for Bankruptcy Will My Student Loans Get Discharged?
For those who have to repay a student loan and are considering
filing for bankruptcy, the question on their mind would be: does filing for bankruptcy discharge my student load? Unfortunately, though, student loans most probably will not be discharged in the case of bankruptcy. According to
Chapter 7 Bankruptcy the only circumstance when the student loan might be discharged is if it would cause the debtor “undue hardships”. Basically, the same rule is applicable for the
Chapter 13 Bankruptcy cases also.
Discharging student loans gained attractiveness during the 70s, when students would file for bankruptcy soon after they finish their pricey education. They would do so before they start earning so that they could get the loan out of the way. However, the requirements that were considered before discharging a student loan were altered in 1998.
According to these new changes, your student loan will only be discharged if the bankruptcy court is convinced that paying back the loan would bring about undue hardships for you or the people who are dependent on you. Keeping this in mind, the Federal Student Aid Ombudsman (FSAO) stated that there were three criterions that would be used to determine whether a person is eligible to have their student loan discharged or not.
The first point that would be looked at is that in the case that you were forced to pay, you will not be able to maintain a minimal standard of living. The next point of consideration is if this difficulty in maintain finances will stretch out to a significant length of period over which you are expected to pay back the loan. The third and last criterion is that you have made an effort to repay the loan before you decided to
file for bankruptcy. Your efforts to repay would usually be taken into consideration if you have been in repayment for at least five years.
If you do not meet these criteria when you file for bankruptcy then it is unlikely that your student loan would be discharged.
- Free 24-hour Bankruptcy Information Line
- Call 1-800-859-0844
