Can I File Bankrupty on Student Loans?
Student loans cannot be easily eliminated through bankruptcy. While many people still have to pay student loans after filing for bankruptcy, some student loans can be discharged through bankruptcy protection. In order to get them eliminated, you must prove that they will lead to a severe financial hardship.
Other People Are Reading
-
Discharging Debt
-
The purpose of filing bankruptcy is to have debt discharged. If you are in serious debt, you could file Chapter 7 bankruptcy to essentially eliminate all of your debts. While the majority of your debts can be discharged through this manner, there are some types of debt that are not considered to be eligible for discharge. Things like alimony, child support and student loans are among them. In most situations, student loans remain even after having all of your other debts discharged through bankruptcy.
Undue Hardship
-
Even though the majority of student loans are not discharged through bankruptcy, there is one exception to this rule. If you can prove that the student loans will cause an undue hardship financially, the court may consider discharging the debt. The court could use a test known as the Brunner test to determine if you can maintain a minimal standard of living while paying the loans. If you cannot meet this standard under your current circumstances, they may forgive the debt.
-
Chapter 13
-
Another option to consider is using Chapter 13 bankruptcy to consolidate your debt. Under Chapter 13 bankruptcy, you consolidate all of your debts into a single monthly payment to the court. The advantage of this is that the court, not your student loan lender, will decide what your monthly student loan payment will be. This could reduce your payment, and it will also prevent any collection actions from being taken against you.
Forbearance and Deferment
-
If you get behind on your student loan payments, you do not necessarily have to consider filing bankruptcy. Student loan lenders are generally very flexible and have other options available for you to consider. For example, you could use a student loan forbearance or deferment to help you with your payments. This could allow you to postpone making payments on your student loans for a certain amount of time while you are in the middle of a financial hardship.
Income-Based Repayment
-
Student loan lenders often offer income-based repayment plans as a benefit for borrowers. This type of plan can be beneficial when your income is very low. With this type of repayment plan, your monthly payment will be based on a percentage of your monthly income instead of the traditional payment. As your income increases over the years, your payment will also increase. After taking a forbearance or deferment, you may consider using this repayment plan to start making payments again.
-
