Student Loans And Bankruptcy

Student loans are difficult, but not impossible, to discharge in bankruptcy. To do so, you must show that payment of the debt “will impose an undue hardship on you and your dependents.” You must file a formal “complaint” with the bankruptcy court, a “Complaint to Determine Dischargeability.” It’s then up to you to prove to the court that paying your student loan will create an undue hardship. Consult first with an experienced Chicago bankruptcy lawyer who can suggest some alternatives to bankruptcy and help you prove hardship if you finally choose bankruptcy. Courts use different tests to evaluate whether a particular borrower has shown an undue hardship regarding student loan payment. The most common is the Brunner test, used by most bankruptcy courts, which requires a borrower to show that:

– the borrower cannot maintain, based on current income and expenses, a “minimal” standard of living if forced to repay the student loans
– this state of affairs is likely to persist for a significant part of the repayment period
– the debtor has made good faith efforts to repay the loans

If you successfully prove undue hardship, your student loan can be discharged. Filing for bankruptcy also automatically protects you from collection actions on other debts, at least until the bankruptcy is resolved or until the creditor obtains permission from the court to start collecting again. If you can discharge your student loan debt by proving hardship, bankruptcy may be a good option for you, but consult first with a knowledgeable bankruptcy lawyer. A bankruptcy can remain part of your credit history for ten years. Costs are associated with filing for bankruptcy as well as with some of the procedural hurdles. If you’re anywhere in the greater Chicago area and you’re considering bankruptcy, protect yourself and your longterm interests. Speak first with an experienced Chicago bankruptcy lawyer. If your debts are piling up, don’t wait another day to make the call.