Can You File Bankruptcy on Student Loans?
Student loan debt can be crippling. To make matters worse, they are often classified as “non-dischargeable” debts. This means that, in most cases, student loans cannot be eliminated through bankruptcy. But it is not entirely impossible.
Though potentially difficult to do on your own, you may be able to discharge some or even all of your student loan debt. Luckily, a bankruptcy lawyer in Mobile, AL at Loris Bankruptcy Law Firm can help.
Can I File Bankruptcy on Student Loans
As you likely know, bankruptcy is a taxing process that can have long-term negative effects on your finances. However, when you have exhausted all your other options, it may be your only remaining chance for relief.
To do so, you must prove to the court that you cannot pay back your loans without having a serious negative impact on you and your dependents. The court then weighs your eligibility, though there is room for interpretation, meaning the outcome can vary greatly.
Chapter 7 vs. Chapter 13 Bankruptcy
Depending on the circumstances of your finances, both Chapter 7 and Chapter 13 bankruptcy may afford you some relief. However, the two provide vastly different methods to get there.
In simple terms, Chapter 7 involves selling your assets to pay off your debts. In contrast, Chapter 13 allows you to reorganize your debts into affordable monthly payments. Both options allow your remaining debts to be discharged once you’ve paid all you can. You must also keep in mind that each type of bankruptcy filing stays on your credit report for a slightly different length of time.
To complicate things a bit further, the federal government is constantly looking at the laws surrounding bankruptcy and student loans and making changes that may help some but inconvenience others. Currently, you have to prove that your student loans are causing something called “undue hardship” in order for the debts to be discharged.
What Is Undue Hardship?
Undue hardship has criteria that can vary widely from court to court. Typically, being underemployed or even unemployed is not considered an undue hardship. Events and situations completely out of your control, such as a severe illness or other medical condition, are usually needed to meet the court’s requirements.
Most courts use one of two tests to evaluate undue hardship, the Brunner Test or the Totality of the Circumstances Test. A bankruptcy attorney in Mobile, Alabama, will be able to sit down with you to discuss your situation and guide you on whether you have a good argument to prove undue hardship.
Obtain a Student Loan Bankruptcy Lawyer
While it is possible to file for bankruptcy on your own, working with a student loan bankruptcy lawyer is strongly advised to ensure a smoother process. Doing so can help you maximize the effectiveness of your filing, protect your rights, and make sure you are making informed decisions. By consulting with an attorney before filing, you can also explore your options, discuss what to expect during the process, and determine the best type of bankruptcy for your unique situation.
Bankruptcy filings can already be a stressful and emotional time without the added complexities of student loan debt. Instead of going in circles asking yourself, “Can I file bankruptcy on student loans?” speak to a student loan bankruptcy lawyer such as those at the Loris Bankruptcy Law Firm.
With over 30 years of experience behind us, our team of professionals can help you find the right solution for your financial situation. We pride ourselves on treating each and every client with the utmost compassion and respect. Call us today at (251) 432-3100 to learn more about how we can help.