Those looking to wipe the slate clean and start anew might be disheartened to learn the bankruptcy facts about bankruptcy and student loans.
As you review your assets in preparation for bankruptcy, you may be wondering how many debts you will be able to discharge. If you are like most people, you might still have some student loans left to pay. Unfortunately, the law surrounding bankruptcy and student loans states that you cannot discharge your student debt obligations in a bankruptcy filing.
Bankruptcy and Student Loans Fact #1: You cannot discharge student loans in a normal bankruptcy.
Even though you can have credit card, mortgage, and auto loans discharged during bankruptcy, some debt obligations will stay with you through bankruptcy. You are still responsible for paying alimony, child support, taxes, fines, and student loans through the bankruptcy process. Like the other listed responsibilities, student loans are considered exempt from the bankruptcy process, whether they are federal loans or private student loans. In the case of federal student loans, the government can seize your tax refund or garnish your wages to make sure it collects its money.
In a few situations, student loans can be legally discharged, but they are rare. If you die or are declared 100 percent disabled, your student loan debts will be discharged, and your estate will not be responsible for your debts. In the case of disability, your credit score will not be harmed by the student loan discharge. If you attended a school that closed before you were able to complete your academic program, your student loans will be canceled, relieving you of the responsibility to repay them at all.
Bankruptcy and Student Loans Fact #2: You can request a hardship hearing.
When it comes to bankruptcy and student loans, you should also know this: You can request a hardship hearing during your bankruptcy and present your case to a special judge, requesting that the student loans be discharged. A discharge of student loans after a hardship hearing is extremely rare, but if you think you have a good reason why paying your school loans presents a hardship, talk to a qualified bankruptcy attorney.
Remember, though, that everyone declaring bankruptcy is having a hardship, so your situation will need to be particularly dire. Getting your student loans discharged is a little like getting out of jury duty!
Bankruptcy and Student Loans Fact #3: Some federal programs will pay your student loans for you!
Another interesting fact about bankruptcy and student loans is that you might be able to discharge your student loans by participating in federal programs that relieve some or all debt obligations in exchange for working in programs like Peace Corps, AmeriCorps, or Vista. These service programs might give you a flat amount of money or they could offer to shave a percentage off your loans. By serving in Vista or the Peace Corps, you won’t be making much money, but you could be relieved of as much as 15 percent of your student loans.
If you are currently struggling to repay your student loans, make sure you explore your bankruptcy options before defaulting, including debt consolidation loans. If you talk to your lender, you might be able to arrange a loan deferment or a forbearance, which grants you temporary relief by postponing your loan payments for a specified period of time. You can also work out a different payment plan with your lender to help you make payments every month. Remember that removing a student loan is all but impossible, so you might as well start finding ways to repay your student loans as soon as possible.
If you are struggling with bankruptcy and student loans, it stands to reason that you might have a poor credit score. One way or another, start learning how to build credit so you can build your credit score to 720 as quickly as possible.
The information being presented here about the dischargeability of student loans is dated and inaccurate. Student loans are being discharged by many BR judges in many districts without the benefit of an Adversary Proceeding. ( there is no such thing as a HARDSHIP appeal in bankruptcy, that would be redundant ).
However, there is an established procedure for doing so, the aforementioned Adversary Proceeding. In an Advesary proceeding, your student loans can be discharged. This is a special sesssion of your normal Chapter 7, often overseen by a seperate judge, but not always. Each case is decided upon its own merits therefore a str8 answer, can someone have their student loans discharged, cannot be answered with any certainty. But to say that student loans cannot be discharged in bankruptcy is flat wrong. Its not likely, but it is possible and it is becoming much more common due to the economy. Regular BR judges are doing it, but you have to have extreme or compelling circumstances. For example if you are a single mother of 3, and paying your student loans would be the difference between the family being on welfare or not, the loans will be discharged. If you are permenently disabled through and action occuring AFTER the incurment of your loans, your loans will be discharged, although perm disability can be disharged by the govt without the BR court. If you are diagnosed with any terminal disease, they deep 6 the loans. If you’re spouse is sick and unable to work, etc, etc.
However the REASON most people dont get their loans discharged this way is the EXPENSE. Most attorney will charge 3-4 times the normal rate if an Adversary Proceeding is involved.