How Does Filing For Bankruptcy Affect my Federal Student Loans?
It’s difficult, but not impossible, to discharge student loans in bankruptcy. Some borrowers have been able to discharge their student loans through bankruptcy with a little-known procedure.
Credit card debt, personal loans, vehicle loans, and mortgages are far easier to pay off than college loans. Student loans are included in the same category as child support obligations, taxes, and criminal fines under the United States Bankruptcy Code. Statistics on the rarity of student loan bankruptcy discharge are based on data provided by the Educational Credit Management Corporation (ECMC). When a borrower files for bankruptcy, ECMC is the guarantee agency that takes care of delinquent federal student loans.
That’s 0.04 percent, or around 1 in 2,500 chances. You have a better percentage chance of getting struck by lightning than being able to discharge your school loans in bankruptcy. But to be fair, these low odds are partially due to very few borrowers including their student loans in their bankruptcy filing.
Repayment of the loan would cause a severe and sustained reduction in you and your family’s standard of living.
You can prove that the hardship will continue for a majority of the repayment period.
You can prove that you have consistently made good faith efforts to repay the loan prior to declaring bankruptcy.
Depending on the terms of the bankruptcy court’s determination:
Your loan could be totally discharged
Your loan may be partially discharged, requiring repayment of some portion of your loan.
You may be denied discharge, but offered different repayment terms, such as a lower rate or a different repayment program.
If the bankruptcy court does not discharge your loans, you still may have options to lower your payment. Many different repayment plans exist and switching to a plan that’s a better fit is usually possible.
If you have questions about filing an Adversary Proceeding, speak with your Bankruptcy attorney. Contact TitanPrep if you would like to discuss your repayment plan options or change your repayment plan