How to Repair Student Loans Through Bankruptcy

Two Parts:Determining if Bankruptcy is Your Best OptionGetting Your Bankruptcy Filing Started

Over the past few years the amount of government funding for post-secondary education has decreased, and the level of student debt in the United States has increased dramatically.[1] Many graduates find that they are still searching for good jobs months or even years after leaving school. If you are one of many young adults struggling with a massive student debt load, filing for bankruptcy may be a reasonable option to alleviate some or all of your debt.

Part 1
Determining if Bankruptcy is Your Best Option

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    Determine if you are eligible to file for bankruptcy. The myth that student loans are never dischargeable in bankruptcy proceedings is completely false. In fact, according to a 2011 study, as many as 40% of bankruptcy filers who included their student loans in their case saw those loans decreased or forgiven.[2] However, US bankruptcy code states that student loans are not able to be discharged in bankruptcy proceedings unless they cause "undue hardship" on the borrower.[3]
    • In order to prove "undue hardship" pose by student loans, a bankruptcy filer must pass a list of tests known as the Brunner standard. This is the most common test used in student loan bankruptcy proceedings, and relies on demonstrating these three circumstances:
      • If you repay your loans, it will make you unable to maintain a minimal standard of living for you and your family.
      • Your financial circumstances that led to you being unable to afford your student loans is likely to continue through the remainder of your repayment term.
      • You have made good faith efforts to repay your student loans.[4]
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    Consider the consequences of filing for bankruptcy. This decision should not be taken lightly. It will be a long and likely expensive process that will require you to build credit from scratch and may require the seizure of some of your assets by the court. You should try everything else in your power to renegotiate the loans first before considering filing for bankruptcy, especially if your loans are privately funded (as opposed to government loans).
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    Estimate the cost of filing for bankruptcy. Another thing to consider is whether or not the process will be worth it, as in some jurisdictions the legal fees may add up to a significant amount. Having student loans discharged involves a more complicated and expensive type of legal procedure than a standard bankruptcy filing, so be sure to research expected fees before deciding on any course of action.
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    Investigate the various government programs available to student loan debtors. Before you make any decisions, consider all of your options. With the help of these programs, most debtors should be able to repay their loans in a manageable way.[5] However, if you have excessive medical bills to pay in addition to your loans, chances are you are better off filing for bankruptcy.[6]

Part 2
Getting Your Bankruptcy Filing Started

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    Contact a bankruptcy lawyer in your area. If you are convinced that you qualify for discharging your student loans through bankruptcy and are prepared for the consequences, find a bankruptcy lawyer in your area and request a consultation. The lawyer will be able to confirm whether or not you are truly eligible for this type of filing and can guide you through the rest of the process. While you can file for bankruptcy without a lawyer, getting your student loans discharged through bankruptcy involves a complicated process known as an adversarial proceeding. This process is much more involved and legally advanced than a standard bankruptcy proceeding and almost always requires legal counsel to navigate successfully.[7]
    • Make sure that your lawyer is familiar with this kind of case. Look for an attorney experienced in adversarial bankruptcy filings. These types of lawyers are considerably more successful in getting student debt decreased or forgiven.[8]
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    Decide whether or not to move forward with the filing. Based on the attorney's advice and also on their estimated fee, you now have more information on which to decide whether or not to actually file for bankruptcy. Again, make sure you have exhausted all other available options before deciding on this course of action.
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    Be sure that you are filing for Chapter 7 bankruptcy. Chapter 7 is the only type of bankruptcy filing in which student loans may be forgiven. Chapter 13 bankruptcy is another option that might lower your payments on your loans for a few years, but will not give you full forgiveness of the loans.[9] Discuss the differences between the two and your options with your lawyer.
    • For more information on the difference between the two, see how to know the difference between chapter 7 and chapter 13 bankruptcy
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    Work with your attorney to complete the process. As previously mentioned, filing for this type of loan discharge is an incredibly complicated legal process that will vary from case to case. In all cases, though, know that you will be required to submit documents that list all of your assets and debts to the court, so be to sure to organize the relevant paperwork beforehand. See how to file for chapter 7 bankruptcy for more information on the general process.



  • Check first with your physician as you may be eligible to cancel your student loan debt by a declaration of total and permanent disability. This would be less expensive than bankruptcy.
  • This article is intended to serve as a general guide only and is not intended to replace professional legal advice or service.
  • Be advised that you may not be successful in dismissing your student loans even if you pass the Brunner standard and meet all other listed criteria. Getting student loans dismissed is a complicated process that may also result in only part of your loans getting dismissed.

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Categories: Bankruptcy