Discharge Student Loans In Bankruptcy

"Beyond A Reasonable Doubt"

You cannot discharge student loans in bankruptcy unless you can prove beyond reasonable doubt that paying the debt will:

• cause you and your dependents undue hardship
• you have to prove that you will not be able to repay the debt
• and at the same time be able to provide the basic needs for you and your family 
• you have to show that this hardship is not going to affect you for a short time but it may last during the whole loan repayment period

Before you can discharge student loans in bankruptcy, you need to show:

• that you had tried to pay the loans but didn’t succeed
• you can’t file for bankruptcy without proving that you did put some effort into the loan repayment.

Median Income Test

If you earn an average income that is higher than the median income for your state and have a high disposable income, you will have to file Chapter 13 bankruptcy. This will allow you to spread your payments over 3-5 years.

If you don’t have a steady source of income or earn an average income that is less than the median income for your state, you can file a Chapter 7 bankruptcy student loans. Chapter 7 allows you to liquidate your non-exempt assets and use this cash to pay your creditors.

Student Loans After Bankruptcy?

When you file for a student loan bankruptcy, you can still be eligible for more student loans.

In the early nineties, students who had federal loans had to reaffirm their debts so as to be able to get further financial aid. However, this condition has since been changed and students no longer have to reaffirm their debts to get further loans. Unlike in federal loans, students who have had private loans may have a difficult time getting more financial aid.

To know whether you can take student loans bankruptcy consider the following: you have to show that your students loans do not fall under the category of ‘educational loans ’as defined by the bankruptcy code.

Can I Take Student Loans Bankruptcy?

For instance, educational loans only apply to student loans for students that attended an ‘eligible educational institution’. Find out from a professional if your school falls under that category and whether or not your student loans can be termed as ‘educational loans’. If not, then you can file for bankruptcy.

• If you have failed to prove undue hardship in order to discharge student loans in bankruptcy, you are allowed to file a petition and try again.
• In order to file a petition for bankruptcy and student loans, you need to know that if you had a co-signer on the student loan, you and the co-signer will have to prove undue hardship.
• An important part of bankruptcy on student loans when filing Chapter 13 that you need to be aware of, is that the loan will accrue interest during the 3-5 years that you will be making payments.

After you successfully discharge student loans in bankruptcy, you can still be eligible to apply for other federal loans. However, you will need to prove your creditworthiness and may have to increase your credit scores before you can be approved for any more loans.