School Loans and Bankruptcy
Filing Bankruptcy to Get Rid of Student Loans
Once students graduate from college, the chore of finding a job is something that must be done soon thereafter. Many students who took out school loans to attend a college or university are now faced with little money and chances are they don't yet have a job. Bills to pay, student loans that are due and no job yet leave many in a financial crisis. Many students are considering declaring chapter 7 or chapter 13 bankruptcy because they cannot pay back the loans.
Student loans are not something that is commonly discharged in bankruptcy. It is possible to get rid of your student loans in a bankruptcy filing but it is not the norm. Contact an experienced bankruptcy attorney and find out the options that you have to discharge your student loans.
Because these loans are at least partially federally owned and considered an unsecured loan (there is no collateral on the loan: unlike a car, they cannot repossess the knowledge you were taught in school), they cannot be dismissed by a personal bankruptcy.
Student school loans, in fact, are one of the few types of debt that cannot be dismissed under almost any circumstances. Even in a case of defaulting on a student loan, your paycheck could be garnished, and the government or lender can sue you to get the money owed, even if it comes to liens on property or income. So if student loans are past due, that debt will follow you until it is paid off unless it is an exceptional situation.
In normal cases, student loans will not be forgiven, that is not to say that it is impossible to have your student loans discharged in a bankruptcy. It has happened: after the initial bankruptcy proceedings, an individual must meet a criterion that proves hardship. An adversary proceeding in bankruptcy court then takes place to decide if you meet the “hardship rules/test.” If you are able to prove to the court that you meet the three criteria of this test, a court may discharge the loan.
Efforts have been made to include student loans be discharged in a bankruptcy: In 2010 a bill was presented to congress in support of making school loans matter in personal bankruptcy discharges. In spite of its support, that bill did not pass. Additional efforts to once again bring up such legislation are on-going.
There are some other alternatives to consider when you need payment relief from school loans. You can defer payment on the loan, seek student loan forgiveness, look at flexible loan repayment options, or take advantage of student loan consolidation. These options may offer some aid in paying back school loans.
If you are facing additional debt because of high student loan payments, you may want to consider filing for bankruptcy protection. A chapter 7 or chapter 13 bankruptcy will alleviate most, if not all, of your unsecured debt and allow you the ability to service your student loans.
