It is commonly said that student loans are impossible to remove through filing for bankruptcy. However, that is not always true. It is a common misconception about bankruptcy. To remove student loans through a bankruptcy, it is not an easy process but it is possible. There are a few criteria that you have to meet in order to remove your student loans through bankruptcy. You first have to be able to show that you would be living in a state of poverty if you continued to pay your student loan bills as normal. You would be putting you and your family in a below average standard of living situation. Second you have to be able to prove that you honestly tried to pay back your debts on your own, but you don’t have enough income or the means to do it. Speaking with an experienced bankruptcy attorney can help you make the decision that is right for your particular circumstance.
To discharge a student loan you will need to file a separate action otherwise known as an “adversary proceeding”. This is a separate lawsuit that is related to your bankruptcy case – but is a separate action. In this action you are requesting the bankruptcy court to see your situation as insolvent and that it would cause extreme hardship on you and those that are financially dependent upon you. Your creditors could be allowed to challenge this. The bankruptcy court is able to determine if it would be undue hardship or not based on a few factors. It would mean you would not be able to maintain a minimal standard of living, that this hardship would last throughout the entire process of paying back the loan, and that you tried to your best ability to pay the debts back. If the court does find your case to be eligible to dismiss, the court could discharge all of your debts, you could be partially discharged from your debts, or the terms of your loans could be switched and you would pay a lower interest rate.
If the bankruptcy court decides not to dismiss your student loan debt but you still can’t afford the payments, you would need to contact your loan servicer to discuss different repayment options or ask to change them. This can be done at anytime, even if your bankruptcy case has been closed for some time. Most if not all student loan services have programs that are income based as to repayment terms student loan debts.