Does Bankruptcy Get Rid of Student Loans?

When you realize that your debts have gotten completely out of control and there is no reasonable way you can possibly pay them off, you may begin to consider bankruptcy as a solution to your financial woes. If you include a significant sum in student loan debt included within your overall debt, you may you may also wonder, “ Does bankruptcy get rid of student loans? ” Although it is a simple question the answer is quite complicated. Learning about the basics of bankruptcy and student loans can be helpful, though it is important to keep in mind that only an experienced Kentucky bankruptcy attorney can give you information and advice specific to your situation.

In most cases, student loans cannot be discharged in a bankruptcy; however, in a small number of situations it is possible to get these loans discharged. Ultimately, you will have to prove that being forced to repay your student loans would create an undue financial hardship for you. The test used to determine whether or not repaying student loans would cause a hardship varies amongst courts. The Brunner Test is a popular test. This test requires the following criteria be met in order to prove that repaying student loans would pose a financial hardship:

• You cannot maintain a minimal standard of living for yourself and your dependents, based upon your current income and expenses, if you were forced to repay your student loans.
• Your financial situation is unlikely to change for a long period of time.
• You have made a good faith effort to repay your student loans.

Courts that do not use the Brunner Test generally take a “totality  of the circumstances” approach that essentially looks at all relevant information in an attempt to determine if forcing the debtor to repay the loans would be an undue hardship.

If you meet the aforementioned criteria you may qualify to have your student loans discharged; however, most courts are reluctant to discharge student loan debt, meaning it is harder than it sounds to successfully convince a court that repayment would be a financial hardship.

If you do not qualify to have your student loans discharged the way they are handled will vary based upon the type of bankruptcy you file. If you file Chapter 7 bankruptcy and your student loans are not considered an undue hardship, your student loans will not be impacted and you will still owe this debt. On the other hand, if you file Chapter 13 bankruptcy you may have the opportunity to make smaller payments to your student loans during your Chapter 13 plan repayment period. After your Chapter 13 plan has concluded, however, you will still owe the remaining amount of the loans.

As you can see, the way bankruptcy impacts student loan debt can be quite complicated. This is why you should speak with a Kentucky bankruptcy attorney as soon as you start to consider bankruptcy as a viable option to curing your financial troubles.