Bankruptcy And Student Loans

Published on June 2, 2020 by J. Andrew Meyer

Bankruptcy And Student Loans

Over the last ten years, student loan debt in the United States has ballooned to trillions of dollars. For many, owing over $50,000 in student loans has become the norm. What’s worse is that some borrowers never even obtained the degree they so desperately sought via loans. Owing such a large debt can be overwhelming, and some borrowers are turning to bankruptcy protection to retake their financial freedom. Below are a few facts on how bankruptcy affects student loans, and tips for managing your student loan debt. Each case is different, so it is always important to consult a bankruptcy attorney to answer specific questions surrounding your bankruptcy case.

Can Student Loan Debt Be Discharged Through Bankruptcy?

Traditionally, student loan debt has been determined by the courts and legislation not to qualify for discharge in bankruptcy proceedings. However, the courts have begun to allow for discharge of student loan debt under special circumstances. Several recent cases have ruled that if a borrower can demonstrate that repayment would prove to be an undue hardship, then discharge of student loan debt would be permitted. The U.S. Department of Education has further clarified this development:

“[You] may have your federal student loan discharged in bankruptcy only if you file a separate action, known as an “adversary proceeding,” requesting the bankruptcy court find that repayment would impose undue hardship on you and your dependents. You must declare Chapter 7 or Chapter 13 bankruptcy and demonstrate that repayment would impose an undue hardship on you and your dependents. This must be decided in an adversary proceeding in bankruptcy court. Your creditors may be present to challenge the request.”

While some have been successful in discharging their student loan debt, gaining approval from a bankruptcy court to have student loan debt wiped out is a highly fact specific decision. Only an experienced bankruptcy attorney can look at the facts of your case to determine if you may qualify to have your student loan debt discharged.

Options For Repayment

Like all debts, student loans can become much more manageable if there aren’t large sums of money owed elsewhere. Unsecured debt such as credit cards can be discharged under bankruptcy. By eliminating other debts, bankruptcy may help free up the income to make it possible to stay current and eventually pay off student loan debt if you do not qualify for discharge.

The Department of Education has also introduced a series of repayment plans that base your monthly obligation on your current income. These repayment plans have allowed borrowers to lower their monthly payments to manageable amounts without having to prove financial hardship. Similarly, student loan debt forgiveness programs for public service employees have provided a means for those within that sector to eliminate their loans after a predetermined number of payments have been made. Contact your loan servicer to see if you qualify for forgiveness or if you would like to discuss repayment plan options or change your repayment plan.

Florida Bankruptcy Attorneys

The attorneys and staff of The Bankruptcy Team have decades of combined experience helping clients with mortgage modifications, foreclosure defense and bankruptcy alternatives to effectively resolve their financial problems. If you are dealing with an unmanageable debt situation and are contemplating bankruptcy, reach out to The Bankruptcy Team to consult with one of our bankruptcy attorneys today.

J. Andrew Meyer

Andrew Meyer was born in Deland, Florida, in 1970. He graduated with an International Baccalaureate Degree from St. Petersburg High School in 1988, and attended the University of Florida, graduating in 1991 with a degree in Economics awarded with High Honors. Mr. Meyer also attended law school at the University of Florida, receiving his juris doctorate degree in 1995. While at the University of Florida, Mr. Meyer was inducted into Florida Blue Key and Phi Beta Kappa. Mr. Meyer was first trained as a lawyer by Richard T. Earle, Jr., and thereafter worked at the Attorney General's Office for the State of Florida in the Bureau of Criminal Appeals before becoming a senior staff attorney for the Florida Second District Court of Appeal. Mr. Meyer also served as a law clerk to the Honorable Chris W. Altenbernd, Retired, at the Second District Court of Appeal. Following his time at the Second DCA, Mr. Meyer worked at Carlton Fields, focusing his practice on appellate matters. In 2004, Mr. Meyer became an advocate for consumers as a partner at James Hoyer, and then later moved to Morgan & Morgan's class action department in 2009.

Latest posts by J. Andrew Meyer (see all)

Will I Lose My House And Rental Property If I File For Bankruptcy? - March 22, 2021
Can Creditors Take Your Stimulus Check? - March 16, 2021
Does Florida Have Any Covid-19 Eviction Protections? - March 9, 2021

Bankruptcy And Student Loans