Can bankruptcy get rid of my student loans?

Only in extremely rare cases. In a Chapter 7 bankruptcy, all debt is discharged (cancelled) at the end of your bankruptcy unless the bankruptcy code specifically prohibits it. (In a Chapter 13 bankruptcy, you may have to pay off a portion of your unsecured debt through your repayment plan).

This year, total student loan debt in the United States reached $1 trillion – more than credit cards and any other type of consumer debt. At the same time, college graduates’ earnings have declined. More and more students are declaring bankruptcy to help get out from under a mountain of student loan debt. But because of a 2005 reform law, unlike most debt, student loans cannot almost never be discharged in bankruptcy.

To discharge a student loan, you must show that paying it back would be an undue hardship on you or your dependents.  To do this, you must file an adversary proceeding with the court. Specifically, you will have to prove that:

(1) You cannot maintain, based on current income and expenses, a “minimal” standard of living for yourself and your dependents if you are required to repay the loans;

(2) Additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period; and

(3) That you have made good faith efforts to repay the loans.

For more information on dealing with student loan debt, consider contacting a Seattle Bankruptcy Attorney.

Weitz Law Firm, PLLC
5400 Carillon Point, Building 5000
Kirkland, WA 98033
(425) 889-9300

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