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Can I Get Student Loans Discharged in Bankruptcy?

Can I Get Student Loans Discharged in Bankruptcy?
"""One of the most common inquiries I receive as a bankruptcy attorney is whether student loans can be discharged in bankruptcy. The majority of bankruptcy attorneys will tell you it's impossible, but this is not the case. Discharging some or all of your student debt is neither easy nor automatic, but it is well worth the effort. Section 523(a)(8) of the United States Bankruptcy Code states that student loans are exempt from discharge unless ""undue hardship"" exists. For the vast majority of individuals with five-figure student loans, paying the exorbitant monthly fees feels like an undue hardship, but the bankruptcy court interprets the term ""undue hardship"" very narrowly. The good news is that recent court decisions grant students with student loan debt hope for relief.

Most bankruptcy attorneys will tell you that it is impossible to discharge such debts in bankruptcy because they are either incompetent or unwilling to go through the trouble. It is crucial that you locate an experienced bankruptcy attorney, not just the cheapest one that appears in a Google search. The requirements for discharging your student loans in a Chapter 7 bankruptcy are briefly explained below.

To obtain a discharge on your student loans, you must first submit a discharge request. Most people believe erroneously that these loans cannot be forgiven, so they never attempt, and most bankruptcy attorneys are unaware of what I'm about to tell you. Here are some fascinating statistics to demonstrate this concept. According to a study conducted by the Harvard Law School, 99.9% of those who have student loans and register for bankruptcy do not attempt to discharge this debt. That alone is a staggering number. Forty percent (40%) of those who actually file for bankruptcy to discharge their student loans receive either a partial or complete discharge of their loans. Consider for a moment that almost half of those who request a discharge of their student loans receive it, while 99.9% of those with student loans who file for bankruptcy never even inquire. This equates to approximately 70,000 individuals filing for bankruptcy each year who are eligible to have their student debt discharged or partially discharged, but only 0.01% of these 70,000 individuals even attempt to do so. This means that 28,000 individuals per year who could discharge their student debt through their bankruptcy petition never even attempt to do so. People, let that settle in for a moment...

Do you qualify? is the second and possibly most essential aspect of obtaining a discharge for student debt. The Brunner Standard is the most prevalent criterion for determining whether a student loan qualifies for a bankruptcy discharge. This standard is founded on the case described below: Second Circuit Court of Appeals for the United States. Marie BRUNNER, Appellant, v. NEW YORK STATE HIGHER EDUCATION SERVICES CORP., Appellee. No. 41, Docket 87-5013. (Cite: 831 F.2d 395) The decision in this case stipulates three conditions that must be met for a person to qualify for student debt discharge. These are the applicable rules: 1. If you were to repay your student loans, you would not be able to maintain a minimal standard of living for yourself and/or your family; 2. The financial circumstances that caused you to be unable to afford your student loans are likely to persist for the remainder of the loan's repayment period; 3. You have attempted to repay your student loans in good faith. If you can meet the three requirements, it is well worth your time and money to endeavor to have your student loans discharged in bankruptcy, either partially or entirely.

If you wish to obtain forgiveness on these debts through bankruptcy, you must take additional actions that are not covered by the standard attorney-client retainer agreement for filing bankruptcy. How does this affect you? This means that in addition to bankruptcy filing and the normal legal fees and filing fees associated with it, additional legal work will be required to be paid for this service, outside of the attorney-client retainer agreement for your standard bankruptcy. The vast majority of debts that are typically included in a bankruptcy petition are merely listed in the petition's schedules. Not so with student loans; with student debt, your bankruptcy attorney must file what is known as a ""adversary proceeding"" in court. These adversary proceedings are a distinct lawsuit filed in bankruptcy court in conjunction with your bankruptcy petition. Essentially, you file a lawsuit against the debtors who hold your student loan debt in an effort to have some or all of that debt discharged. It is of the utmost importance to recognize that this is a highly complex area of the law, and that you should always retain the services of an experienced bankruptcy attorney. Numerous individuals attempt to file for bankruptcy on their own, but I would never recommend doing so, and I will not even attempt to describe the procedure because it is beyond the scope of this article. Obtain the assistance of an experienced bankruptcy attorney.

The fourth significant finding of the Harvard Law School study, which pertains to characteristics shared by nearly all bankruptcy cases in which student loans were discharged, is as follows: 1. The debtor (the person filing for bankruptcy protection under the US Bankruptcy Code) was most likely unemployed; 2. The debtor typically had some form of medical hardship that contributed to this situation; and 3. the debtor typically had a lower income than in the year prior to filing the bankruptcy petition. These are facts that were most likely common to all bankruptcy filings that resulted in the discharge of student loan debt, despite the fact that they are not clear-cut requirements previously described in this article.

You must petition for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code, which is the final component of this equation. Chapter 7 Bankruptcy and Chapter 13 Bankruptcy are the two most common types of bankruptcy. In Chapter 13 Bankruptcy, you establish a debt repayment plan (which must be accepted by the Bankruptcy Court) with the assistance of your attorney, in which you repay a portion of your unsecured debt based on your income and expenses, over three to five years. With a few exceptions, such as student loans, alimony, and child support, Chapter 7 bankruptcy allows for the immediate discharge of these unsecured obligations. In order to file the adversary proceeding described in the previous section, you must be in Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, this option is NOT available.

If you believe you meet the criteria outlined in this article and are experiencing undue hardship due to the repayment of your student loans, you should consider filing for bankruptcy. This is why it is crucial to locate an experienced bankruptcy attorney who is familiar with the US Bankruptcy Code. Similar to a previous article I wrote about discharging income tax debt in bankruptcy, discharging student debt is an obscure aspect of bankruptcy law that only an experienced bankruptcy attorney would know. Asking one of the following queries is a good way to determine if you are in the office of an experienced bankruptcy attorney: Can student loans be discharged in bankruptcy? or Can income tax debt be discharged in bankruptcy? If either of these questions is answered in the negative, you are not in the office of an experienced bankruptcy attorney but rather a paper pusher. As with most things in life, you get what you pay for, and searching for an attorney based on price is a very expensive way to learn this lesson.

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"Can I Get Student Loans Discharged in Bankruptcy?" was written by Mary under the Finance / Wealth category. It has been read 195 times and generated 1 comments. The article was created on and updated on 31 May 2023.
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