There is a common misperception among many people that student loans simply cannot be discharged during bankruptcy. In many cases, this may be accurate, but not always. Laws were changed some time ago specifically to prevent the discharge of student loans during bankruptcy. However, statistics indicate that as many as 40 percent of bankruptcy filers who include their student loans in their bankruptcy filing paperwork may receive partial or even full discharge of their student loan debt. An experienced bankruptcy attorney can often help you figure out if your student loans can be discharged.
Who owns the student loan itself?
If your student loans were provided by the Department of Education, you will not be able to have them forgiven during bankruptcy. Federal student aid may not be discharged as a result of either Chapter 7 or Chapter 13 bankruptcy. Fortunately for those with substantial debt, however, after or during your bankruptcy, you can apply for an income-based repayment program that will terminate after a given time period. This means the remaining balance will be forgiven if you maintain timely payments during that period. Combined with bankruptcy relief, a structured repayment plan can help.
Only student loans that were issued by private lenders are eligible for bankruptcy discharge. An experienced bankruptcy attorney can help you review your student loan documentation to see who the issuing party was for the loan and whether your student loans may qualify for inclusion in your bankruptcy proceedings.
Was your school a qualifying institution?
For many saddled with student loan debt, their school was not properly accredited. It may have followed predatory enrollment and student loan practices, and may have since gone out of business. Whether you finished the program or not, and whether that program benefited you or not, the student loan debt can follow you for decades. The Department of Education provides a searchable database for those who need to determine if their school was a qualifying institution. If it was not, the student loan debt incurred to attend the school may be able to be discharged during bankruptcy.
An experienced bankruptcy attorney can make all the difference to your bankruptcy
There is nothing straightforward about the process of filing for discharge of your student aid. It can be a complicated and difficult process. Without the advice, guidance, and advocacy of an experienced bankruptcy attorney at your hearings, it may be all but impossible. Most experienced bankruptcy attorneys can advise you during your initial consultation whether your student loans qualify for discharge. From there, they can assist you with requesting their discharge, if they qualify, or seeking alternative means of relief, such as requesting an income-based repayment program.