Student Loans in Bankruptcy

Getting Relief when you have trouble with Student Debt

At the Liviakis Law Firm, we help individuals and families through financial difficulties by employing the tools available under current debt laws. One of today’s most pervasive financial concerns is student loan debt, especially after years of a faltering economy that has been slow to rebound.

As a result, we are commonly asked whether student loan debt is dischargeable in bankruptcy. While the answer is usually “no,” there are some exceptions to the general rule, as well as options to make student loan repayment more manageable.

To discuss student loans in bankruptcy, contact us today for a free initial consultation.

Does Bankruptcy Clear Student Loan Debt?

Similar to child support and alimony payments, student loan debt is not normally considered dischargeable in bankruptcy. However, if after filing for Chapter 7 or Chapter 13 bankruptcy, a person is able to demonstrate specific “undue hardship” in repayment of the loans, the bankruptcy court judge may make an exception to partially or fully discharge the debt. Generally speaking, in order to show such a hardship, a person must have a long-term mental, physical or medical disability that prevents obtaining adequate income for repayment. These exceptions are rarely made, but are less difficult to obtain if the student loan company doesn’t challenge your claim of hardship.

Importantly, even when student loans have been discharged, co-signers are still held responsible for the remaining balance and accrued interest.

Student loans may also be included in a Chapter 13 repayment plan, allowing a more manageable payment over the course of three to five years. In this context, you will be held responsible for the balance of the loan at the end of this time.

Although student loan holders are not often willing to negotiate a discharge of student loans due to hardship outside of bankruptcy, a knowledgeable and skilled lawyer may be able to resolve student debt after filing chapter 7 bankruptcy.