You have nothing to lose by at least investigating the possibility of getting your student loans discharged in bankruptcy.
Student loan debt is a crippling burden for many individuals, including both students and older people who may have co-signed loans for young relatives. Unfortunately, there is a very pervasive thought that it is impossible to discharge student loans in bankruptcy, and experts suspect this is leaving many individuals missing out on well-deserved debt relief.
In reality, it is possible to discharge certain types of student loans in certain special situations. According to one study, student loan discharge attempts have about a 40 percent success rate. However, the same student found that only 0.1 percent of individuals who filed for bankruptcy included their student loans in their debt relief efforts.
Don’t let yourself languish among the 99.9 percent who ignore their student loans when filing for bankruptcy!
Instead, consider whether your circumstances may actually give you a reasonable chance of discharging your student loans along with your other debts. After all, if you try to have your student loan debts discharged, you may have a 40 percent chance of success. But if you do not even try, you will never find relief.
What Circumstances Are Favorable to Discharging Student Loan Debt?
Student loan debts are handled a bit differently than other types of debt in a bankruptcy proceeding. Rather than simply filing your paperwork and waiting for the court’s decision, you will have to argue your position at an adversarial proceeding. In determining whether the debts are causing you undue hardship and should be discharged, most courts will apply the Brunner test, which requires the judge to consider whether:
- The debt is making it impossible for you to maintain a minimal standard of living
- The financial hardship will continue for the majority of the repayment period
- You have made good faith efforts to repay the debt
Judges seem most amenable to find in favor of the debtor in cases where the individual is unemployed or has a very low income and has some kind of medical hardship.
Recent Case Study
A recent student debt bankruptcy case shows that there is hope for some individuals to find relief.
The case involves a 65-year-old man who owed over $240,000 in student loans after sending three children to college. The man lost his job 14 years ago and now lives on the $13,200 per year earned by his wife. The couple exhausted their retirement savings and applied for bankruptcy in 2012. After 4 years of litigation, it was announced this month that the Department of Education is going to settle out of court to discharge the debts.
Need Advice About Bankruptcy?
If you would like advice about the possibility of using bankruptcy to discharge any type of debt, such as credit card debt, medical bills, payday loans, or even student loans, please contact California Bankruptcy Relief at 951-755-1000.
