Before 1998, student loans could be discharged or wiped-out in either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy if they had been in repayment status for at least seven years. However, changes to the bankruptcy laws in 1998 made government-backed student loans non-dischargeable in bankruptcy regardless of the age of the loan. Then in 2005, further changes in bankruptcy laws made even private student loans non-dischargeable.
Today, the only way to discharge student loans in bankruptcy is to prove that repaying the student loan would create an “undue hardship.”
This requires filing an “adversary proceeding” which is basically a trial within your bankruptcy case. At trial, you must convince the bankruptcy judge that you can’t provide even a minimally adequate standard of living for yourself and your family and repay the student loan at the same time. More than likely, you will need to show that the conditions causing the hardship are not likely to improve over time. While this is not an easy task, if you are successful in showing undue hardship, your student loan will be completely cancelled.
If you are unable to prove undue hardship, Chapter 13 bankruptcy may still provide help to you with your student loans. See my article on Chapter 13 and student loans for more information.
If you are struggling with debt problems and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation. I would count it a privilege to be able to visit with you in a relaxed and confidential environment where I’ll answer all of your questions in plain English and give you the straight scoop on the pros and cons of bankruptcy as related to your specific situation.
