Discharging student loans through bankruptcy

On Behalf of | Aug 16, 2018 | personal bankruptcy |

A significant portion of the American population carries student loan debt. This debt is taken on in hopes of bettering one’s self and increasing the chances that he or she will find a well-paying job in a field they enjoy. While some of these individuals are able to graduate or leave school with minimal debt that can be easily paid off, others find themselves struggling to make their monthly payments for years or even decades.

It may seem like escaping this debt is impossible, but it isn’t. Although extremely challenging, it is possible to discharge student loan debt by utilizing the bankruptcy process. In order to do so, a bankruptcy petitioner must pursue either Chapter 7 or Chapter 13 bankruptcy and demonstrate that the student loan debt has created an “undue hardship.”

When determining what constitutes an “undue hardship,” a court will consider a number of factors. Amongst these are whether the debt would disallow the individual from maintaining a minimal standard of living and if the hardship will remain for a substantial portion of the loan repayment period. It is also critical that the petitioner has demonstrated that he or she has made an effort to make his or her loan payments.

There are essentially three possible outcomes when trying to discharge student loan debt through bankruptcy. The first is that the debt is fully forgiven and all payments are ceased. The second potential outcome is that a portion of the loan is discharged, thereby leaving a more manageable repayment amount. The last potential outcome is that the loan balance remains in place but with renegotiated terms. This could help reduce monthly payments and make repayment easier.

Discharging student loans through bankruptcy is extremely difficult. However, this doesn’t mean that those struggling with this debt should give up any debt relief consideration. Instead, they should discuss their situation with a skilled bankruptcy attorney who may be able to help them assess and act on their legal options. This step could be the step to help an individual obtain a fresh financial start.