Know How to Clear Your Student Loans with Bankruptcy

Student loans are a common part of the American experience. They allow countless individuals to pursue higher education. But the weight of student loan debt often lingers long after graduation. Many people face financial distress because of it. They wonder if student loan bankruptcy is a viable solution.

Quick Summary:

  • Filing student loans under bankruptcy is possible. But discharging them is generally challenging due to their classification as “non-dischargeable” debts. The discharge can be possible under circumstances like proving “undue hardship.”
  • There are two common types of bankruptcy. Most debts are possible for discharge with Chapter 7. Chapter 13, meanwhile, involves a structured repayment plan. It offers potential relief for most financial situations.
  • Discharging student loans through bankruptcy is rare. Legal standards for proving “undue hardship” vary. One must prove evidence of an ongoing inability to sustain a basic standard of living. They must also show an inability to meet loan repayment obligations.
  • To prove a student loan discharge case based on undue hardship, you need compelling evidence. The evidence must show you can’t pay the loan.
  • Look into student loan consolidation and forgiveness as alternatives to bankruptcy. 

In Monroe, LA, the legal landscape surrounding student loan bankruptcy has evolved. Now, individuals can seek relief from their student loan obligations. It’s essential to acknowledge that discharging student loans through bankruptcy is challenging. But it is not off the table.

Can I File Student Loans Under Bankruptcy? 

Filing student loans under bankruptcy is possible. But discharging student loans through bankruptcy is generally challenging. Student loans are part of “non-dischargeable” debts. This means that unlike other debts in bankruptcy, their elimination is not that easy.

In certain situations, people may seek bankruptcy to relieve their student loan debt. For example, they can prove “undue hardship”.

Individuals can explore two primary bankruptcy chapters when considering student loan bankruptcy. These are Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy

In Chapter 7 bankruptcy, the discharge of most unsecured debts is achievable. But remember, student loans are generally considered “non-dischargeable.” The debtor can only prove “undue hardship” to discharge student loans. Proving undue hardship can be a formidable challenge.

Chapter 13 Bankruptcy

In Chapter 13 bankruptcy, you create a structured repayment plan over three to five years. Student loans remain non-dischargeable in Chapter 13. But the repayment plan may allow more manageable payments. Your income and expenses will be the basis for that. This allows individuals with a structured path to address their financial situation.

Remember, discharging student loans in bankruptcy is not common. Instead, it’s an exceptional case. The legal standards for demonstrating undue hardship can differ. They usually need proof of ongoing inability to sustain a basic standard of living. They also need proof of ongoing inability to meet loan repayment obligations.

What is the Process for Discharging My Student Loans?

Proving undue hardship entails a rigorous legal process that often involves:

  • Filing for Bankruptcy: Start the bankruptcy process under either Chapter 7 or Chapter 13. That will signal the beginning of the journey toward potential relief.
  • Demonstrating Undue Hardship: Provide evidence that goes beyond financial challenges. It must show that maintaining a minimal standard of living is unattainable. This is while meeting student loan repayment obligations.
  • Adversary Proceeding: Begin an adversary proceeding within the bankruptcy case. This involves a separate lawsuit. It deals with the dischargeability of student loans. This adds an extra layer of complexity to the legal proceedings.

What are the Ways to Prove My Student Loan Discharge Case?

Proving your student loan discharge case involves compelling evidence. You must show the severity of your financial situation. Here are key ways to strengthen your case:

  • Provide comprehensive documentation of your financial situation. This should include income, expenses, assets, and liabilities. This documentation should offer a clear snapshot of your current financial standing.
  • Show that repaying your student loans would prevent you from maintaining a minimal standard of living. Outline necessary expenses for housing, utilities, food, transportation, and other essential needs.
  • Show that your financial difficulties are likely to continue for a significant part of the student loan repayment period. Use realistic projections based on your current circumstances. Consider factors like employment prospects, health, and other potential life changes.
  • Emphasize any efforts you’ve made to repay your student loans in good faith. Document your attempts to negotiate alternative payment plans. Seek loan forbearance or take part in income-driven repayment programs.
  • If applicable, highlight the impact on your dependents. Show that they depend on your finances. Explain how repaying student loans would affect their well-being.
  • Document medical conditions and associated expenses if health issues also worsen your finances. Include medical records, bills, and any information proving these health issues.
  • If unemployment or underemployment is a factor, provide evidence of your active job search efforts. This could include records of job applications, interviews, and communications with potential employers.
  • Document any attempts to negotiate alternative repayment plans with your student loan lenders. Strengthen your case by exploring options to change your repayment terms. If you’ve tried without success, it will help.
  • Highlight any adverse financial circumstances that are beyond your control. Examples are a sudden change in employment, a family crisis, or unexpected financial obligations.
  • Prove that you have complied with the terms of your student loans. Make genuine efforts to meet your repayment obligations before seeking bankruptcy relief.

What are Student Loan Consolidation and Student Loan Forgiveness?

Student loan consolidation is a financial strategy combining many student loans into a single new loan. This process simplifies repayment by merging various loans into one monthly payment.

This is different from student loan forgiveness. It allows borrowers to have a part or the entirety of their student loans canceled. The government program relieves them from the obligation to repay.

Both are alternative options to relieving yourself from student debt. Before choosing either option, consult a bankruptcy attorney for advice on your case.

Talk to Our Experienced Bankruptcy Attorneys Today!

To build a strong case for student loan discharge, you need meticulous documentation. You also need a clear narrative of your financial hardships. Last is, you will need strategic legal guidance. Our bankruptcy attorneys from E. Orum Young Law can help improve your chances of success. They can also help you prove undue hardship. Then, you can get possible relief from your student loan obligations.

Start your path to financial success in Monroe, LA. Get a free case review for your student loan bankruptcy today!