There are many options out there for reducing your debt and getting a clean slate financially. One such option is bankruptcy, but there are several things you should know about student loan debt and bankruptcy, including:
- There are more restrictions
- There is more paperwork involved
- Most student loan debtors never attempt a discharge
Restrictions on Discharging Debt
When filing for bankruptcy, there are more complications to consider when your debts include student loans. Most unsecured debts can be wiped away under Chapter 7 and Chapter 13 typically requires a restructured repayment of debts. Neither of these typically covers student loan debts unless you can prove undue hardship.
There are ways to discharge much or all your student loan debts, but only under special circumstances. If you meet those circumstances, you must file a separate adversary proceeding under your bankruptcy case to prove your loans create undue hardship. You can also have a law firm to do this on your behalf.
Most Don’t Do It
While nearly 40 percent of debtors who request student loan discharge under their bankruptcy cases are approved in court, most debtors themselves never apply for their debts to be discharged. Most people never file to discharge their loans or participate in the process that determines if they qualify.
If you are considering filing bankruptcy, you should look at all your debts from credit cards to student loans. Get help from a lawyer to see if you qualify for student loan debt discharge.