With the rising educational costs in the US, more and more students are seeking help of student loans to finance their education. The large number of college loans taken by the US students has become a major concern for most graduates who find themselves unable to meet with their financial obligations every month. Though student loans and bankruptcy is a combination that is rarely possible, yet students can sometimes seek help of bankruptcy to discharge their student loans. If you’re a student who is worried about “Can you file bankruptcy and not pay student loans”, read on to know more about it.
Is it possible to discharge student loans by filing bankruptcy?
Unfortunately it is not always possible to discharge your student loan debts through a bankruptcy. Due to some public policy reasons, student loans are very rarely discharged through a bankruptcy, whether Chapter 7 or Chapter 13. If one could easily get rid of their student loan obligations by filing bankruptcy, the entire student loan program and the bankruptcy court would soon collapse due to the abundance of people who took college loans to finance their education and then filed bankruptcy, not being able to arrange the monthly payments.
However, it is not that it is impossible discharge student loans in a bankruptcy; it’s just a bit difficult. Student loans and bankruptcy can only go hand in hand if they meet some pre-existing conditions. If the students have been repaying their loan for the past seven years, then he can discharge the loan through a bankruptcy and if the debtor can prove that payment of the debt will impose undue hardship on the borrower and his dependents, he can again be able to discharge such loans.
The Federal Student Aid Ombudsman (FSAO) has said that there are three criteria that will decide whether or not a student borrower will be eligible to have his student loan discharged through a bankruptcy. Have a look at the criteria.
- Will repaying the student loans deprive you from living a minimum standard of living? If the bankruptcy court sees that you will no longer be able to maintain a normal standard of living, they will consider discharging your student loans through a bankruptcy.
- Will you be able to maintain the standard of living during the repayment period? The second thing taken into consideration is whether or not you’ll be able to maintain an average standard of living while repaying the student loans.
- Did you make an earnest effort for paying the student loan? Before you file a bankruptcy, it will also be checked whether or not you’ve made an earnest effort of paying off the student loans and if you’ve been repaying for the past 7 years.
With all these questions answered, you can decide if you can discharge your student loans by filing bankruptcy. Contact a bankruptcy lawyer and know the bankruptcy laws that will help you benefit by filing bankruptcy. Make sure you work with an authentic attorney who has proofs of discharging student loans through bankruptcy.