Law Office of James Keenan
Help when you need it
Personal service since 1995
Can you discharge student loan debt? Maybe. Ordinarily student loans cannot be discharged through bankruptcy. Meaning that student loan debt cannot be eliminated through a bankruptcy filing and discharge. Other types of debt can be discharged, or eliminated, in bankruptcy. But not student loans. Usually, that is. Student loans are on the rise. The ...
Can you discharge student loans in bankruptcy? Maybe soon you can. Eliminating student loans though bankruptcy is not normally allowed under the current bankruptcy code. Though student loan debt is unsecured, like credit card debt and medical bills, it is not treated the same. But times may be changing.
As this editorial piece for the Los Angeles Times reflects, perhaps now is the time to reevaluate whether you can discharge student loans. Student loan debt has skyrocketed over the last decade. So have college costs. Given the tuition increases over the same span it should not be a surprise for the spike in student loan debt.
College costs have exploded and, along with it, debt. College degrees, once considered financial bedrock, have not held their value compared to their costs. If your graduate from college you should earn more. Right? Often this is not so. At least when it comes to the inflated costs to get the degree. Earning $1,000 more per month does little good if that comes with a lifetime debt of $1,200 per month. The math doesn’t make sense. Perhaps, then, now is the time to evaluate whether you should be able to discharge student loans.
Student loan can be eliminated through a separate bankruptcy proceeding. It is a costly procedure. And it takes an extreme showing of hardship to rid yourself of the student loan debt. As I have often commented to clients, you would not want to be able to discharge student loan debt. To discharge student loan debt would not be worth the hardship it would require. Showing an inability to afford the debt is not enough.
Most debt that is discharged in bankruptcy requires, primarily, a showing of inability to afford the debt. Perhaps it is time now to apply this same standard to student loans.
You can have student loans, and you can file bankruptcy. But getting rid of a student loan though bankruptcy is a tough trick. Not that you can’t do it. But eliminating student loans in a bankruptcy is hard. Perhaps I should say hardship. That, though, is what it takes to discharge student loans through bankruptcy. Showing of hardship is the key to allowing a student loan to be discharged in bankruptcy.
The type of hardship to eliminate a student loan in bankruptcy goes way beyond basic hardships of life. Losing your job likely won’t do it. Losing your ability to work might. Workplace injury probably not. Paralysis maybe. You get the point. It takes a significant showing of hardship to discharge student loans. In a recent news article, the Supreme Court denied a possible appeal to the rules of student loan debt and bankruptcy. By denying the hearing, the Supreme Court let stand the lower court’s findings of law. The hardship analysis touched on here is laid out in detail in the story.
Even if you could establish the necessary hardship to eliminate your student loan through a bankruptcy filing, there is more you would have to do. To discharge a student loan you would have to bring a separate filing within the bankruptcy court while your case is pending. This is called an adversary proceeding. And the separate proceeding costs a separate fee, likely far more than the cost of the bankruptcy filing.
What then to do if you can’t discharge your student loan debt through bankruptcy? For most, eliminating other debts is a common scenario. If you have credit card debt, that can be eliminated, or discharged, in bankruptcy. Same if you have medical bills, car repossessions, lines of credit or other unsecured debts. Eliminating these debts might lighten your financial load, allowing you to afford your student loans.
Every individual and case is different. Learning your bankruptcy options may free your cash flow for student loans.
Bankruptcy does not normally allow for the discharge of student loans. Only under an extreme hardship can a student loan be discharged. These guidelines give the degree of difficulty of eliminating student loans through bankruptcy. Unemployment and other debt obligations will rarely do the trick to discharge a student loan through a bankruptcy. As I have mentioned to clients over the years, you wouldn’t want the hardship it takes to qualify for the elimination of student loans in a bankruptcy.
Efforts have been made to allow the elimination of student loans in bankruptcy. But, to date, nothing has changed. The Youtube video below presents a picture of the efforts made to make student loans more likely to be discharged through a bankruptcy filing.
What, then, to do? Your best bet is to eliminate all the debts you can through bankruptcy if this is your best debt elimination option. Often times getting rid of other debt will allow you to manage your student loans.
Whether you might qualify for student loan hardship allowing you to eliminate your student loans in a bankruptcy is a factual analysis. Since student loans are often the biggest consumer debts, a free consultation to determine whether student loans can be discharged is well worth the price!