How to Claim a Student Loan on Bankruptcy
Generally, it is not possible to claim a student loan on bankruptcy and have it discharged so that you are freed of the obligation to repay. However, there is a narrow exception, called "undue hardship," where it is possible to include a student loan in your bankruptcy discharge. To establish undue hardship, you must prove that you are fully and permanently disabled by lasting and debilitating sickness or injury and thus unable to work at all and to repay your student loan. You need a doctor to certify this, and you also must file a separate motion in Bankruptcy Court and appear before the court to argue your case. If you cannot make your case before the court, there are several other alternatives including the Teacher Loan Forgiveness Program which may be of help if you are having trouble repaying your student loan.
- Difficulty:
- Challenging
Instructions
Things You'll Need
- Full and permanent disability, rendering you unable to work.
- Separate filing in bankruptcy.
- Doctor's certification of your full and permanent disability.
- Court date to argue your motion for undue hardship.
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How to Claim a Student Loan on Bankruptcy
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File a separate motion in Bankruptcy Court arguing that your student loan is causing undue hardship, and asking the court to allow you to discharge the debt in bankruptcy.
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Have a doctor certify that you are totally and permanently disabled by lasting and debilitating sickness or injury and thus unable to work at any type of gainful employment. There is also additional paperwork required by the Bankruptcy Court that the doctor must fill out.
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Set a court date to be heard on the motion for undue hardship and make your case before the court.
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If your motion fails, look for an alternative. One possibility is the Teacher Loan Forgiveness Program. Another alternative would be to talk to your lender and try to work something out so that your student loan is not so difficult for you to repay.
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Tips & Warnings
You can apply to have your student loan forgiven under the Teacher Loan Forgiveness Program if you have been a full-time teacher for five consecutive years at a public or private non profit school which has been labeled a Low Income School by the U.S. Department of Education.
If you are having difficulty making your student loan payments, communication with your lender. You may be able to work out better repayment terms. Your lender could also grant you a six month forbearance, for example, until you are better able to make your monthly payment.
Bankruptcy should only be viewed as a last resort. A bankruptcy filing stays on your credit history for ten years and it seriously affects your ability to get a loan and to buy a house. A bankruptcy filing can also adversely affect your ability to rent a house or an apartment, and can also adversely affect your ability to get a job. Look for an alternative to filing Bankruptcy like the Teacher Loan Forgiveness Program, or work something out with your lender which will make your repayment terms less difficult.
