Many debtors often want to know can you file bankruptcy on student loans. Unfortunately, most debtors will not be able to eliminate this type of debt by filing for Chapter 7 or Chapter 13. However, if a debtor can prove that he will have extreme financial stress by repaying the loan, he may be able to get rid of the loan through bankruptcy.
The Exception
To declare bankruptcy on your student loan debt, it is critical that you prove to the court that will you undergo financial hardship if you have to repay it. The test that will determine hardship will vary depending on the court where you file.
However, most bankruptcy courts hesitate to discharge student loan debt regardless of the hardship tests. Those who have a low income or attended a for profit vocational school have a better chance of getting their loans discharged.
One of the tests that courts use is the Brunner test. There are three qualifications that debtors must meet in order to get the court to discharge a student loan. These factors are:
- Effort- you must prove to the court that you attempted to repay the debt
- Long term financial hardship
- Poverty
Another test that the courts use for debtors who want to know can you file bankruptcy on student loans is the totality of circumstances test. Some courts use this test to take into consideration all of your circumstances. The courts will then determine if you will have undue financial stress by repaying your student loans. Debtors should also note that bankruptcy courts either discharge the entire loan or none of it.
What If Your Student Loan Is Not Discharged?
If the bankruptcy court decides not to discharge your student loan debt, you can consider filing either Chapter 7 or Chapter 13. The courts will hold you responsible for repaying the loans But, if you choose to file Chapter 13, you may have the chance to pay a lower amount during your repayment period.
When wondering can you file bankruptcy on student loans, you should not attempt to handle your case on your own. An experienced bankruptcy attorney can provide the expertise you need to navigate the legal process.
Contact us to schedule a consultation to learn about our bankruptcy and debt relief services.