Student Loan Debts and bankruptcy don’t really mix. Although student loans are not forgiven in bankruptcy most of your other unsecured debt is.  At one time student loans were forgiven in bankruptcy since that time Congress amended laws several years ago to disallow filing bankruptcy on student loan debt.  This includes almost all types of student loan debt:  private, governmental, and also federal non-profit loans.  As you can see this can be a big problem for people needing to file bankruptcy.

Student Loan Debts and Bankruptcy

Please notice that we said “almost all” student loans cannot be put into a bankruptcy filing.  There are however, some exceptions.  Certain circumstances will allow a student loan to be forgiven.  These circumstances were narrowly laid out in a 1987 New York decision.  A person must be able to maintain a minimum standard of living.  Thus, if a person makes reasonable and honest attempts to pay off the student loan debt, but cannot they may be eligible for forgiveness.  However, they must also have no foreseeable change in living circumstances in the future.  So if it is unlikely the person will promote further, or even be able to get a better paying job they will be a candidate. Otherwise, a creditor may be able to obtain a judgment against you.

Disabilities and Student Loan Debt Forgiveness

The forgiveness exception almost exclusively applies to those people who have disabilities.  So, when applying a person must first establish they indeed have a disability.  You can begin by having a ruling from the Social Security court.  It must have more proof though.  You can provide this with a statement from a doctor or other medical records.

The next step is to begin with the application for forgiveness.  You must apply through the Department of Education if you have federal loans.  If you provide adequate proof that you suffer from disabilities then you will likely receive a discharge without ever going to court.  If your loans are private, then you can apply for a similar process through lenders.  Not all lenders will have a process like this, but many will.

YOU MAY ALSO FIND OUR ARTICLE ON BANKRUPTCY OPTIONS USEFUL.

Finally, if you cannot apply through your lender, then you have the option of asking the bankruptcy court to discharge the student loan debts.  Again, you must have proof of your disability and provide a solid argument as to why the loans are dischargeable.

Claremore Bankruptcy Attorneys

Our attorneys have years of experience in Student Loan Debts and Bankruptcy law.  We understand that student loan debts are often a large part of the problem for people filing bankruptcy.  If you are facing issues with student loans and have questions regarding the exception, call us.  Our first bankruptcy consultation is free.