When most people take out a student loan, they do it with the highest aspirations. Even if you do not find a job in your field of study, you’re likely obligated to begin repaying the loan about nine months after you finish school. If you cannot find a job, the payments may be more than you can afford – but a bankruptcy filing may not make the debt disappear.
Bankruptcy and Student Loans
In most cases, student loans are non-dischargeable. Even after all of your other debts are erased, you will still be responsible for your loan debt. If you become nine months overdue on payments, the lender can call in the entire loan amount at one time. There is only one way to discharge student loan debt through bankruptcy.
Discharging Student Loan Debt
The law allows debtors to eliminate student loans if continued payment creates undue hardship. For this to occur, you must prove that you are only making enough money to sustain a minimal living standard; this typically means that you can’t afford luxuries such as cable TV and a cell phone even without the student loan payments. Debtors must also prove that their continued financial outlook is just as grim.
Filing an Adversary Proceeding for Student Loan Discharge
Hardship discharges do not automatically happen when a debtor files for bankruptcy. You or a lawyer must file an adversary proceeding, which asks the bankruptcy court to allow an exception to the student loan discharge rule.
Student Loans and Chapter 13
When you choose Chapter 13 bankruptcy, you agree to gradually repay your debts under court supervision. Under this type of bankruptcy your lender cannot demand the entire loan amount at once; every month, you give all of your disposable income to the court-appointed trustee who in turn distributes the money to your creditors. Even though you will still have your student loan after a Chapter 13 filing, all of your other debts will disappear – making the loan easier to handle.
A Personal Bankruptcy Lawyer can Help
The laws involving student loans and personal bankruptcy are complex and every case is unique. We have offered some general information here, but it should not be construed as legal advice. For help specific to your case, please call a Bankruptcy Lawyer with Shinbaum & Campbell Attorneys at Law.
