Are Student Loans Creating a Hardship?

Many people assume that student  loan debt is not dischargeable in bankruptcy.  Although this is true in many people’s bankruptcy cases, there are situations in which student loan debt may be discharged.  The Bankruptcy Code specifically states that unless excepting student loan debt which was made, insured, or guaranteed by a governmental unit or made under any program funded in whole or in part by a governmental unit or nonprofit organization imposes an undue hardship on you, then the debt can not be discharged in your bankruptcy.

In plain language, the Bankruptcy Code states that if you are in a financial situation and your current situation is not expected to change such that not discharging your student loan debt would render an undue hardship on you, then your student loan debt may be discharged.  The factors some courts use in determining whether or not your student loans may be discharged are the following:

1.  Have you made every effort to obtain employment?

2.  Have your efforts to obtain employment been met with negative results, or does your employment provide you with insufficient income to meet your current basic living expenses plus repayment of your student loan?

3.  Have you attempted to reduce your expenses to a bare minimum standard of living?

4.  Have you tried to negotiate a repayment plan you can manage?

5.  Have you made payments on your student loan whenever possible?

6.  Have you tried to restructure the loan?

7.  Can you maintain a minimal standard of living if the student loan is not discharged?

8.  Is your current financial and employment situation likely to continue for a significant portion of the repayment period?

These are some factors courts use to determine whether your student loan debt may be dischargeable.  To put it simply, have you tried paying your student loans, but have failed, even despite modifications, because you are not able to obtain employment and you will likely not obtain suitable employment to cover a minimum standard of living while repaying your student loans?  If the answer is yes, then it is possible you may be able to discharge your student loans.


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