Bankruptcy in Louisville: Can Student Loans be Discharged Through Bankruptcy?

Filing for bankruptcy in Louisville may lead you to believe that all of your debts will be automatically discharged. While this is the case with most of your debts if you file a Chapter 7 bankruptcy, it is not the case with your student loans. You must formally petition the court to discharge your student loans in your bankruptcy and a number of requirements must be met. This process is quite complicated and best executed by an experienced Louisville bankruptcy attorney.

Many courts utilize the Brunner test. Under this test, you must meet three specific criteria to qualify to have your student loans discharged. These three criteria are poverty, persistence, and good faith. In this case, poverty means that forcing you to repay your student loans would result in you in being unable to provide for yourself and your dependents with a minimal standard of living. Persistence means that the poverty hardship would likely last for a long length of time. Good faith means that you made an honest attempt to repay your student loans. Generally speaking, this means that you made minimum payments on your student loans for at least five years. If you are unable to satisfy even one of these criteria you will have failed the Brunner test.

Some courts use the Totality of the Circumstances test. Under this test, the courts will review your circumstances to determine if repaying your student loans would cause undue hardship for you and your dependents.

Some courts have an all or nothing rule, in that you are either qualified to have all of your student loans discharged in your bankruptcy or you are not qualified to have any of your student loans discharged. Other courts will allow part of your student loans to be discharged if your circumstances make it necessary.

Regardless of the method used by the court to determine eligibility to have your student loans discharged, you must first file a Complaint to Determine Dischargeability. Once in court, the burden of proof will be on you to prove that paying back your loans would create extreme hardship for you. This is best done by an experienced Louisville bankruptcy attorney.

Bankruptcy in Louisville: Getting Legal Advice and Guidance

Proving hardship is extremely difficult to do. As a result, it is very rare that people filing for bankruptcy have their student loans discharged. The best action you can take to increase your chances of success is to hire an experienced Louisville bankruptcy attorney.

To learn more, please download our free Chapter 7 Bankruptcy in Kentucky report  here.