Declaring bankruptcy on student loans
Declaring personal bankruptcy can provide much needed relief for many people who find themselves buried in debt and unable to get out. However, there is a number of financial obligations that are not usually eliminated even if bankruptcy is successfully filed. These include child support or alimony payments, as well as income taxes. A common question about bankruptcy is what happens to student loans?
Well, getting your student loans discharged when declaring bankruptcy is pretty difficult. You see, Congress has passed laws encouraging lenders to make student loans available to as many young people as possible. For this reason, the laws make it very difficult for you to get rid of your student loans by going through bankruptcy. Otherwise, as you can imagine banks, would not be so enthusiastic about lending if their loans were readily subject to discharge under chapter seven bankruptcy.
So the short answer is that student loans are not done away with in most cases. However, if your situation is particularly severe (even in the world of bankruptcy courts), you may be able to get your loan discharged by the bankruptcy judge. You have to prove that you could not meet your financial obligation while still maintaining a reasonable standard of living.
You have to prove that you are facing an undue hardship, such as a medical illness or injury which is not likely to be resolved in the near future. You have to show the court that your financial situation is unlikely to change at least for some time, and you also have to show good faith which means that you have tried your best to meet your financial obligations.
If you’re wondering what is meant by the terms good faith or try your best, that’s a good question. The specific interpretation of this will be left up to the individual bankruptcy judge. So you may get a break, or you may not.
The good news is that many of your debts will likely be eligible for elimination under chapter seven bankruptcy. You should discuss the details of the situation with a good bankruptcy lawyer to see if filing chapter seven (or some other form of bankruptcy) is the right option for you.