Even when filing Chapter 7, student loan debt cannot be discharged. It is one type of debt that must always be repaid. There are exceptions, but these only exist in extreme circumstances. If you’re filing for bankruptcy in Plano, a bankruptcy attorney can go over your debt and answer your questions regarding what can and cannot be discharged.
According to The Project on Student Debt, in the face of high unemployment rates for young adult college grads, about two-thirds of graduating college seniors in 2011 came out with an average debt of $26,600.
Years later, a college graduate could suddenly find him or herself burdened with not only this debt but new debt as well, that which usually happens as one gets a foothold in their chosen career path – clothing, transportation, housing, relocating – which can get some considering bankruptcy.
Exceptions to Chapter 7 and Student Loans
Although you typically can’t get rid of student loans, there may be an exception if you can prove that continuing to pay the debt would result in undue hardship. The requirements for meeting this are pretty stringent.
Courts don’t have a uniform way of determining eligibility. However, many rely on what is called the Brunner Test.
The Brenner Test reviews three things, if:
- you can maintain a minimal standard of living while repaying the loan;
- your financial situation is expected to improve; and
- you’ve made an effort to repay the loans.
Some courts use what is called the totality of the circumstances test. This looks at various factors and whether or not there is sufficient income to pay the loans back. Disability may be considered, as well as the individual’s effort to increase his or her income while at the same time minimizing expenses.
In general, you will be expected to prove that you not only have been unable to make payments on your student loans, but that your ability to repay the loans is not reasonably expected to improve.
Discharging Student Loan Debt
If it’s found that you meet the exception, the entire amount could be discharged. Sometimes, however, courts will discharge a portion of the debt, leaving you to repay the remainder.
You must file to discharge student loans because of hardship in addition to the standard bankruptcy process. This must be done before the other debt is discharged in Chapter 7. Student loan discharge applications are not included in your bankruptcy fees, so be sure that any additional fees are paid.
If you wish to include your student loans in your application for bankruptcy in Plano, tell your bankruptcy attorney to make sure all of the proper steps are taken. Also keep in mind that student debt is not the only type of debt that cannot be discharged in bankruptcy. This is one of the drawbacks for some individuals who think they will solve all of their debt problems by filing.
Other Debt That Can’t Be Discharged under Chapter 7
The following are examples of other debt that can’t be discharged in a Chapter 7 bankruptcy:
- child support payments;
- certain local, state or federal taxes; and
- court fees.
In addition, if you failed to list certain creditors when you filed, they won’t be included. It’s important to list all debt at the start. Keep in mind that debt stemming from fraud or other illegal acts may not be discharged, either.
Seeking Help from a Plano Bankruptcy Attorney
Texas is full of excellent colleges and universities. Unfortunately, in addition to an education, some graduates have acquired thousands of dollars in student debt and now are facing additional financial problems.
Consult a bankruptcy attorney at Warren & Migliaccio, L.L.P. Call 888-584-9614 to schedule an appointment. We can go over the process of filing Chapter 7 and whether student loans may be discharged given your current situation.