Can I File Bankruptcy If Have Student Loans?
As of 2011, most people who file for bankruptcy will not be able to discharge their student loan debt. Discharging student loan debts was a common practice in the 1970s and 1980s, but in 1998, bankruptcy laws changed, making discharging student loan debt quite difficult. It is possible to discharge student loan debt, but it requires the bankruptcy filer meet specific qualifications.
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Minimum Standard of Living
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If the student becomes permanently disabled, he has a chance of discharging the student loan debt through a bankruptcy. The borrower must prove he is totally disabled and unable to work. The borrower must also approve the condition it permanent and irreversible. If the borrower can satisfactorily prove this, he may have an opportunity to discharge the student loan debt. Additionally, the borrower must prove an inability to maintain a minimum standard of living both today and in the future because of the disability.
Repayment History
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The borrower must apply for the discharge and continue to make payments during the application process. The bankruptcy court and the lender review the previous five years' repayment history, and if they find the borrower has not made all of the required payments, they may decline the discharge of a loan. The borrower may request the lender suspend payments during the application process due to lack of income but must receive approval before stopping payments on the loans.
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Fraud
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If the debt resulted from identity theft or fraud, and the borrower can prove this, then the debt may be discharged. These regulations began July 1, 2006, and are designed to protect students from identity theft. The borrower must prove their signature was forged and false certification exists on the loan applications.
School Closure
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Student loans may also be discharged if the borrower attended a school that closed before the student completed course work and received a diploma. If the student withdrew from the program and the school closed within 90 days of the withdrawal, the student may still qualify for loan discharge. If the student attends another school and works to achieve the same degree or certification in the same course work, she may not qualify for discharge of the previous student loans. The student must provide a copy of the student records when asking for the discharge.
Consult an Attorney
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Anyone considering filing for bankruptcy protection who wishes to include student loans in the bankruptcy should contact an attorney experienced with obtaining a discharge for student loans. The consequences of bankruptcy extend far beyond student loans; they should be completely understood before filing for protection.
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