Discharge a Student Loan
- Student loans are usually not discharged by a Chapter 7 or 13.
- Student loans can be discharged under limited circumstances.
- The "undue hardship" rule is in a state of change.
Learn When You Can Discharge a Student Loan In Bankruptcy
Due to bankruptcy reforms in 1998 and 2005, it is almost impossible for an average, non-disabled person to discharge federal or private student loans through bankruptcy. You may be able to get help with your payments through a bankruptcy filing, but there are better options for repaying your student loans.
The Student Loan Bankruptcy Exception
As with all rules there is one exception: you can discharge a student loan in bankruptcy due to undue hardship. Undue hardship is defined as the permanent physical inability to work. You must prove in bankruptcy court:
- You are physically unable to work
- You are likely to be unable to work for most of the loan term
- You made a good-faith effort to repay the debt
- Paying it would prevent you, your spouse, and your dependents from maintaining a "minimal" standard of living.
If you believe you qualify under these guidelines, see an experienced bankruptcy lawyer for help filing an adversary proceeding as part of your bankruptcy case. The undue hardship rules are in a state of change, so do not give up on bankruptcy if you have some type of hardship.
How Bankruptcy Can Help with Student Loans
Although your student loan can't be discharged in bankruptcy, a bankruptcy court may be able to ease an overwhelming debt burden. Some courts may discharge a portion of your student loans, but this is rare and varies by court.
In most cases, the judge will incorporate your student loans into your debt repayment plan under Chapter 13 bankruptcy. Any balance remaining after the payment plan ends will still be due, but your other debts should be paid off by then.
What to Do if You Are Heading Toward Bankruptcy
If your total debts have reached an unsustainable level and you feel you must file for bankruptcy, don't simply stop paying your student loans. Not only are student loans not dischargeable in bankruptcy, but also the federal government has the right to assess stiff penalties, seize tax refunds and other government assistance money, and garnish your wages.
Lenders want to help you avoid default. Contact them for help applying for a deferral, forbearance, or extended repayment plan before the situation gets worse than it already is.
Solutions for Student Loans You Do Not Owe
If a lender is demanding payment for a student loan you don't think you owe, it's best to resolve the situation before you wind up in bankruptcy court.
The most typical situation is a miscalculation of the actual loan balance, especially if the loan has changed lenders multiple times. If you think the lender is requesting more than you owe or hasnt properly credited payments, write to them with your evidence. If the issue is not resolved, then a court can intervene to determine the amount you actually owe. A bankruptcy judge may also do this as part of a bankruptcy proceeding.
Your debt may be canceled if one of three situations apply:
- Situation 1: Your school closed before you completed your education and you couldn't complete it elsewhere. You don't qualify if you voluntarily withdrew before the school closed. You may be entitled to a loan reduction if you voluntarily withdrew and the school improperly withheld any remaining student loan funds.
- Situation 2: Your school or another party signed the promissory note in your name without your approval or the school falsely certified you as eligible for a student loan when you were not.
- Situation 3: You were forced to withdraw due to a disability that developed while you were in school, or that certifiably worsened after you accepted the loan.
For all three situations, it is best to contact the lender or the federal student loan program for assistance in resolving your un-owed debts. Although a bankruptcy court can sort it out for you, other solutions are simpler and better for your financial future.
Student Loan Cancellation Programs
|More About Student Loans|
|Need a Student Loan? Start Here!|
|Student Loan Consolidation|
|Private Student Loan Default|
|How to Pay Off a Student Loan|
|Help with Your Student Loan Debt|
|Settle a Private Student Loan|
|Public Service Loan Forgiveness|
Several federal and state agencies offer programs to help you cancel or reduce all or a portion of your student loan debt without filing for bankruptcy. Most programs involve teaching, nursing, or military service. To learn more about available programs and how you can apply, visit the Federal Student Aid Forgiveness, Cancellation, and Discharge Web page.
In most cases, bankruptcy will not erase your student loans. Although bankruptcy is still a viable solution for desperate financial situations, it is best for your future financial well being to avoid it. Contact your loan servicers as soon as a problem develops to avoid worse financial repercussions.
Get Help Now!
- GC Services & Sallie Mae Loan
- Federal Student Loan Interest Rate Hike
- Stafford Loan Consolidation
- Student Loan Consolidation Rates
- Student Loan Defaults in California
- Student Loan & Deceased Borrower
- WyoTech Private Student Loan
- Top 20 Student Loan Relief Answers
- Sallie Mae Debt-to-Income Ratio
- Student loan to repay a 401(k) loan
- Refinance Private Loan as a Federal Loan
- Sallie Mae Cosigner
- Life Insurance & Student Loan
- 401k to Pay Student Loan
- NJCLASS Loan Forgiveness
- Student Loan Disability
- Federal Student Loan Tuition Waiver
- Federal Student Loan Garnishment
- Closed School Student Loan
- Student Loan & Credit Report
- Pay Off Student Loan
- Common Non-Law & Student Loans
- TERI Student Loan & Debt Settlement
- Statute of Limitations for Student Loans
- Private Student Loan & SOL
Search answers to other readers' questions, or ask your own and get a personal answer!
Learn how much you can save over time by cutting back on your daily latte or other small expenses that add up!
Consolidation? Credit counseling? Debt settlement? Bankruptcy? New loans? Debt Coach, a free online tool, gives tailored advice to help you find the right solution for your needs.
Use our Debt Consolidation Calculator to learn how much your loans actually cost, and to find solutions to save money!
How savvy are you about your personal finances? Take this quick quiz to learn insights into your finance habits and your Bills IQ.
Deciding if a mortgage refinance loan is right for you? Our calculators make it easy. Plug a few key facts about your old loan into our calculator, and learn if a refinance makes sense for you.
See today's national averages for adjustable and fixed-rate mortgages. Then drill-down to learn what is the best rate for you!
Learn what your fellow Bills.com readers think about financial solutions providers and mortgage lenders. We want you to share your experiences, too!
If you want to dive deep into your debt relief options, including the costs of each solution, read these whitepapers. Includes references, so you can follow-up on each fact cited.
Bills.com experts explain, in fast-paced videos, the basics of refinance, debt relief, student loans, and more.
Tool Box Easy to use resources to help you find solutions to your money questions