How to Discharge a Student Loan Through Bankruptcy
Attempting to cancel a federally-insured student loan is a very difficult process. In order to do so, you will need to prove that you are suffering “undue substantial hardship.” Discharge is not permitted in most instances except where the student is suffering a bona fide permanent physical or mental disability.
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Things You'll Need
- Bankruptcy attorney (recommended)
- Pre- and post-bankruptcy credit counseling Certificate/class/fees
- Bankruptcy filings fees
- Bankruptcy forms
- Legal basis for discharge through bankruptcy
- Medical and/or psychiatric records, if applicable
- Endorsement from a physician or psychiatrist, if applicable
Instructions
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Locate and interview with a bankruptcy attorney. You can search the Martindale attorney search website for bankruptcy attorney specialists in your area.
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Pay bankruptcy attorney fees and costs.
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Complete the pre-bankruptcy credit counseling course. Take the course (you can do this online) after paying the credit counseling company a $50 fee. Often, in cases of hardship you can have this fee waived.
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Obtain bankruptcy forms from the bankruptcy court or form kits obtainable from some print shops or business form stores and websites. Be sure to also obtain forms for filing an adversary proceeding against your student loan service company. An adversary proceeding is like a lawsuit within a bankruptcy proceeding. Many kits do not have these forms in them and you must pay a separate fee for them.
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Complete the forms. If you have an attorney, return your completed forms to his office. Keep a copy of all documents.
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File after paying bankruptcy filing fees (you can ask the court to allow you to make up to three payments on the filing fees).
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Serve your lender with a copy of a Summons and Adversary Proceeding Complaint. These must be served by a process server unless your lender agrees to voluntarily accept service by mail (usually by certified mail).
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Pay the process server fees for serving the Summons and Adversary Proceeding Complaint.
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File the original proof of service form with the bankruptcy court, keeping a copy for your records.
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Go through the bankruptcy process including attending a meeting of creditors.
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Attend the trial for your adversary proceeding. Be prepared to submit documentation to the court as to the basis for your hardship claim. This can include providing evidence of your inability to repay your student loan due to permanent physical or mental disability. You should obtain and present copies of your medical and/or psychiatric records to the court. You will also need to have a sworn declaration form from each medical provider attesting that the medical records are true and authentic.
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Complete the post-bankruptcy credit counseling class and pay the additional fee (this, too, can be waived for good cause). File the certificate with the bankruptcy court. Remember to keep a copy for your records.
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Tips & Warnings
Assistance by an attorney is highly advised. It would be difficult to present a strong and convincing case if it involves mental disability and you are well enough to file and handle your own legal case.
You will need to swear under penalty of perjury that all of the documents, evidence and your testimony are true and correct. False statements are punishable by criminal and/or civil penalties.
