Student Loans

Today kids are often taught that if they want to accomplish anything in life, they’ll need as much education as possible. Unfortunately, the expense of a college education has been consistently rising and student loan debt that folks then have to tackle upon graduation can be difficult.  Graduates now average over $25,000 in student loan debt upon graduation. When the grace period finally ends and the first payment is due, the monthly amount owing can be staggering.

If you can’t afford to pay the monthly minimum amount on your student loan, we can help. While student loans are very difficult to discharge in bankruptcy, you have options:

  1. If you are still in school, you can defer payments until you are finished.
  2. If you’re finished with your school, you can request a forbearance from your student loan company and attempt to negotiate to make the payments fit within your budget.
  3. To discharge a student loan debt in a Chapter 7 bankruptcy case the borrower must prove that an “undue hardship” would result from denying the discharge of a student loan debt.  Judges use the Brunner test to determine whether an undue hardship exists.  Under the Brunner test Debtors must demonstrate: (1) that you will not be able to maintain a minimal standard of living if forced to repay the student loan debt; (2) that your financial circumstances are likely to continue for the entirety of the repayment period; (3) that you have made a good faith effort to repay the student loans; and (4) that there is a “certainty of hopelessness” that repayment will be accomplished.
  4. In a Chapter 13 bankruptcy we can help you get payments that will work for your budget.  Student loan companies will not be able to call you, get a judgment, or garnish your wages during the 3-5 years that you are making payments under your Chapter 13 plan.  As in a Chapter 7 case, the Brunner test will still apply if you want to discharge any student loans.

It may be worth exploring a Chapter 7 bankruptcy if:

  1. You can prove that your student loans did not go toward tuition and books at an accredited institution, but went to investments, automobiles, or other expenses, or to an unaccredited institution; or
  2. Eliminating other debt you may have would create enough room in your monthly budget to make the payments on your student loans.

If you need help dealing with the financial burden of student loans, talk to a qualified attorney.