STUDENT
LOANS AND BANKRUPTCY
Generally,
a debtor may not discharge student loan debt
through bankruptcy. But
student loans may be dischargeable in
bankruptcy if repaying such loan would impose an undue hardship on the
debtor
and his/her dependents, if any. To
determine if
undue hardship exists, courts take a case-by-case approach that is
fact-sensitive. The
courts look to
determine whether unique and extraordinary circumstances exist that
would
justify discharging the debt in whole or part.
The courts look at factors such as, for example,
based on your current
income and expenses, after the bankruptcy discharge: 1.
Whether you are
capable of paying the loan while maintaining a minimal standard of
living; 2.
Whether your
financial circumstances are likely to persist for a significant portion
of the
repayment period; 3.
Whether you have
made a good faith effort to repay the loan. There exists a strong
legislative and judicial policy against allowing the discharge of
student loans
in bankruptcy. Therefore,
in order to
have your debt discharged on grounds of undue hardship, exceptional
circumstances must typically be shown. To discharge a student loan in bankruptcy, the debtor must bring an adversary proceeding in the bankruptcy case. Then the debtor must prove at trial before a judge that repayment constitutes undue hardship. Note: Student loan discharge law varies somewhat from state to state and/or from district to district. NON-BANKRUPTCY
STUDENT LOAN STRATEGIES
Outside of bankruptcy, a defaulted or troubled student loan may be, in many cases, rehabilitated, consolidated, worked out, or modified time-wise. Programs exist for repayment based on your income level. In certain cases, one may negotiate a balance repayment reduction. Sometimes the debt may be discharged due to disability. Student loans may be unenforceable if the school closed before you completed your course of study or because of wrongdoing by the school. For a free and confidential consultation, contact Christian bankruptcy lawyer Matthew B. Tozer. Copyright 2010 |