Unpacking the Truth: Can I File Bankruptcy on Student Loans?

May 30, 2024

With more than 43 million Americans holding student loan debt, it’s safe to say that we’re in a national crisis. Ten of millions of borrowers feel like they’re trapped and have no way to escape the quagmire of debt.
When the typical repayment options fail, many wonder, “Can you file bankruptcy on student loans”? Unfortunately, the best answer to that question is, “maybe.” That’s because U.S. bankruptcy laws make it extremely difficult (if not impossible) to discharge student loans.
If you’re feeling overwhelmed by your debt obligations, there are many potential debt relief options available to you. Contact us today for your free consultation with a Florida debt attorney today.

Understanding Student Loans and Bankruptcy

Student loan debt isn’t like most other types of consumer debt. For example, you can typically discharge credit cards, medical bills, etc., fairly easily. In comparison, discharging student loan debts can be a nightmare of a process. Understanding the potential options available to you can be the difference between a failed and successful student loan bankruptcy discharge.

The Legal Framework

Unlike credit cards or medical debts, student loans are not automatically dischargeable in bankruptcy. There’s a high bar to clear – you must prove undue hardship. This means demonstrating:

  • Minimal Standard of Living at Risk: You can’t maintain a basic standard of living for yourself and your dependents if forced to repay the loans.
  • Persistent Financial Hardship: Your circumstances are likely to remain dire for a significant portion of the repayment period.
  • Good Faith Repayment Efforts: You’ve made honest attempts to repay your loans using income-driven plans, deferment, or forbearance before resorting to bankruptcy.

Comparing Chapter 7 and Chapter 13

It’s actually possible to seek a student loan discharge via either of these chapters. However, there are crucial differences between them that you should be aware of:

  • Chapter 7 (Liquidation): This involves the potential sale of your non-exempt assets to repay creditors. Even if you file bankruptcy on student loans and achieve some discharge, you risk losing other valuable assets in the process.
  • Chapter 13 (Reorganization): You enter a 3-5 year repayment plan that consolidates your debts. While unlikely to fully eliminate student loans, it can create breathing room while you pursue a separate discharge.

The Process of Filing for Bankruptcy on Student Loans

If you’re considering the drastic step of filing bankruptcy on student loans, understand that this journey demands rigorous preparation and meticulous attention to detail. You must meet extremely high standards of legal proof to achieve success. Let’s explore what it takes to prove “undue hardship” and the procedural steps involved.

Meeting the Undue Hardship Criteria

Proving undue hardship is the biggest hurdle. Prepare meticulous documentation, including:

  • Income vs. Expenses: Detailed pay stubs, tax returns, and a thorough budget showcasing that your income falls short of essential living expenses.
  • Medical Records: If disability or health conditions are a factor, provide extensive medical documentation.
  • Repayment History: Show enrollment in income-driven repayment programs and a history of good faith efforts.

Preparing Your Case

Attempting student loan discharge through bankruptcy requires a separate “adversary proceeding” on top of your main bankruptcy case. This complexity warrants experienced legal help.

The Role of an Attorney

No lawyer can guarantee the outcome of your case. However, working with a skilled bankruptcy attorney can greatly increase your chances of successful discharge. Not only will they guide you step-by-step through the bankruptcy on student loans process, but they’ll also collect essential evidence, negotiate on your behalf, and represent you in court. A strong legal advocate can maximize your chances of success, however slim they may be.

Navigating the Bankruptcy Proceedings

Can you file bankruptcy on student loan debt? Yes, but the court will rigorously analyze every aspect of your case. Therefore, you should be prepared for:

  • Intense Scrutiny: Expect detailed questioning about your income, expenses, assets, and history of managing your student loan debt.
  • Contested Proceedings: Your lender may strongly oppose your discharge, leading to a drawn-out legal battle.

Life After Filing: Outcomes and Next Steps

Filing for bankruptcy on student loans is a decision that shouldn’t be taken lightly. It can potentially offer financial relief, but there are also long lasting consequences you should be aware of. Understanding these potential outcomes, both positive and challenging, is essential to making informed choices about managing your student loan debts. 

If Your Loans Are Discharged

Full discharge of student loans in bankruptcy is rare but life-changing:

  • Fresh Start: You’re free of the legal obligation to repay.
  • Credit Rebuilding: Bankruptcy does stay on your credit report, but a clean slate is the first step towards recovery.

If Your Loans Are Not Discharged

Unfortunately, this outcome is much more likely compared to the latter. Here’s what to understand:

  • Chapter 13 Obligations: Your repayment plan continues. This can potentially offer a more manageable approach while tackling other debts.
  • Alternative Paths: You can pursue income-driven repayment, consolidation, or, in rare circumstances, seek forgiveness options.

Contact us today to discuss your options with an attorney you can trust.

Alternatives to Bankruptcy for Student Loans: Exploring Other Paths Before Seeking Discharge

Bankruptcy is a drastic measure and rarely successful for discharging student loans. Before taking this route, exhaust these less extreme options:

  • Income-Driven Repayment Plans (IDRs): These federal plans adjust your monthly payments based on your income, potentially leading to forgiveness after a set period.
  • Deferment or Forbearance: Temporarily pause payments during hardship, but be aware that interest may still accrue.
  • Student Loan Consolidation: Simplify repayment and potentially lower your interest rate, whether it’s through federal consolidation or reputable private student loans
  • Public Service Loan Forgiveness (PSLF): If you work in a qualifying public service job, you could achieve full loan forgiveness after 10 years of payments.
  • Employer-Sponsored Repayment Assistance: Check with your employer if they offer student loan repayment benefits.

Important Considerations

  • Can you file bankruptcy on student loan debt? While technically possible, the bar is extremely high.
  • Professional Guidance: Don’t struggle alone with complex decisions about your student loan debt. Reach out for advice tailored to your situation, whether that’s through a non-profit student loan counselor or an attorney specializing in debt relief.

Contact The Attorney Debt Fighters

Understanding whether it’s possible or even how to file bankruptcy on student loans is a complex question that doesn’t necessarily have any easy answers. At Ziegler Diamond Law, we’re here to examine your unique case, explain all the options available to you, and fight tirelessly for student loan bankruptcy. Contact us today for your free case evaluation with the Attorney Debt Fighters.

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Michael Ziegler
Ziegler Diamond Law: Debt Fighters, provides effective legal services to consumers in Clearwater, Florida, and throughout the Tampa Bay area who are facing home foreclosure, unmanageable debts, debt collector harassment, or other debt-related problems.

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About the Author

Ziegler Diamond Law: Debt Fighters, provides effective legal services to consumers in Clearwater, Florida, and throughout the Tampa Bay area who are facing home foreclosure, unmanageable debts, debt collector harassment, or other debt-related problems.