Florida Bankruptcy Laws on Student Loans
The odds of expunging student loans through bankruptcy in Florida or any other state in the U.S. are slim. These loans are protected by federal law which requires borrowers to repay them even if they are going through a financial meltdown like foreclosure. Even with these laws in place, there are several exceptions that borrowers may be able to take advantage of in the right situation.
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Student Loans Are Secured Debt
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Student loans, especially those guaranteed by the federal government, are considered secured debt which means they cannot be discharged in any bankruptcy proceeding. Regardless of whether you apply for Chapter 7 or Chapter 13 bankruptcy protection in Florida, you're going to emerge from that bankruptcy still owing education debt. The automatic stay granted by your bankruptcy may prevent your student loan creditors from pursuing you for your debts for several months; but once your bankruptcy is finalized, collection practices can resume.
Undue Hardship Exception
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According to Florida bankruptcy attorney Jonathan Alper, an exception applies to student loans in a bankruptcy if you are able to show an undue financial hardship in being forced to repay them. This is very difficult to prove since you are required to show that your income is insufficient to meet the basic needs of you and your dependents and that your financial situation is not likely to improve for a significant portion of the life of the loan. If you are permanently disabled and unable to return to work, this may be a way of satisfying the undue hardship requirement and expunging your student loan debt.
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Private Student Loans
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If your student loan is created through a for-profit agency, such as a commercial bank, and is not connected to a non-profit organization, you may be able to expunge it through a bankruptcy in Florida. However, this is also very difficult to do since most lenders tie student loans to a non-profit guarantor to close the loophole that would allow you to expunge the debt through bankruptcy.
The Loan Is Too Large
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Another way of expunging your student loan debt, through bankruptcy, is to claim the loan was too large for your education expenses and therefore does not qualify as an education loan under federal law. For example, if the cost of your education minus all other contributions from your accounts and scholarships was $10,000 and your student loan supplied $20,000, you may be able to argue that the loan couldn't have gone completely to education expenses which would then exempt it from bankruptcy protection.
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