Discharging Student Loans throught Bankruptcy

In these tough economic times, many college graduates have found themselves burdened with loans that they cannot afford to pay.  As a result, many people call my Michigan Bankruptcy law office asking whether or not they can discharge their student loans during a Bankruptcy. 

Unfortunately, a Bankruptcy will not discharge student loan debt in most circumstances. Thus, even if you qualify for Bankruptcy and proceed with filing for one, you will still have to pay back your student loans.

Temporary Relief

If you have dischargeable debt, filing for a Bankruptcy can still help you with your student loans. Remember, when you file for bankruptcy, you are granted temporary relief (also known as an "automatic stay") from harassing collection activities. If you are in default on your student loans, the temporary relief period just might give you enough time to get caught up on your payments or negotiate a new payment structure with your lenders.

Undue Hardship

In very limited circumstances, student loans may be discharged for "undue hardship." Most people do not qualify for this because Bankruptcy courts require more than temporary financial issues. Since Congress did not define an "undue hardship," the courts look at various factors, such as: whether the debtor’s current financial status permits her to maintain a minimal standard of living for herself/dependents if she has to repay the student loan, whether the debtor’s financial status is likely to continue for a significant portion of the repayment period, and wehther the debtor has made a good faith effort to repay the loan.

A qualified bankruptcy attorney can review your case and inform you if you meet the requirements for such an exception.