Student Loan Borrower Filing for Bankruptcy

A bankruptcy trustee is charged with overseeing a bankruptcy estate. The court generally appoints the bankruptcy trustee. The trustee usually administers the bankruptcy estate and handles any asset selling and details of repayment.

Undue Hardship and Student Loan Debt

Bankruptcy courts do not treat student loans in the same way as other debts. Under most circumstances, student loans are not discharged during bankruptcy. There are limited cases in which a court will allow discharge of student loans. Those cases are decided based on the facts of the case. The debtor must generally show that undue hardship exists which prevents repayment of the loans.

Some situations that may constitute undue hardship which could justify a court's discharge of student loan debt in bankruptcy include:

• Disability of the debtor that prevents the debtor from working and repaying the student loan debt;
• Death of the debtor;
• A school improperly stated the benefit of the education you received;
• Some teachers are eligible for student loan discharge (not necessarily through bankruptcy);
• Some public servants can discharge student loans (not necessarily through bankruptcy);
• Service in the military can help to relieve some individuals of student loan debts (not necessarily through bankruptcy);

On October 8, 1998, bankruptcy law and the obligation to repay student loans changed. Now, a debtor can no longer cancel student loans through bankruptcy unless the debtor can prove to the court that repayment of the loan would be an undue hardship. Undue hardship is defined independently by each jurisdiction and a court has discretion in bankruptcy cases. While it has become increasingly difficult to dismiss student loan debt through bankruptcy, there are still courts which allow it under circumstances that fit their undue hardship criteria.

If you do not make enough money to repay your loans for a variety of reasons, a court may dismiss your student loan debt. Some debtors were not able to finish a course of study or did not obtain jobs in their field after obtaining an education. Each case is different, and undue hardship is ultimately a decision for the court.

Getting Legal Advice

If you need help figuring out whether or not your student loans can be discharged in bankruptcy, contact an experienced bankruptcy attorney today. An attorney can help you assess your finances in a confidential setting. Bankruptcy can seem like a scary procedure, but it helps many debtors get back on their feet and start new paths.