Can I File For Student Loan Bankruptcy?
Under the United States Bankruptcy Code, you can get debt relief if you need a fresh start to get your finances in order. The protection can be helpful if you have been burdened by student loan debt for years, subjecting you to predatory practices.
You may have heard that student loans can’t be discharged in bankruptcy, but that’s not true. The Department of Education takes essential steps to avail bankruptcy relief to federal student loan borrowers. Private student loan borrowers can also receive the relief the Code provides. To pursue student loan bankruptcy relief, consult skilled debt collection lawyers in West Virginia.
They can provide legal guidance on how to have the debt discharged. They can also ensure lenders, servicers, loan owners, and debt collectors honor that debt relief when the court removes your debts.
Which Education Loans Can Be Discharged in Bankruptcy?
Discharging student loan debt is possible, but the Bankruptcy Code provides a challenging test for relief. The test makes discharging student loans more complex than other types of unsecured debt. West Virginia bankruptcy lawyers can work with you on your case to help you navigate those extra steps.
They can also evaluate your student loan debt to determine if it can be discharged in an ordinary bankruptcy proceeding, in the same way as most other consumer debts. The following types of student loans are not subject to the discharge test:
- Loans whose amounts were higher than the cost of attendance, for example, tuition, room, books, and boarding
- Loans to pay for education at institutions ineligible for Title IV funding, for example, schools in foreign countries, unaccredited colleges, or unaccredited training and trade certificate programs
- Loans for students attending school less than half-time
- Loans for living expenses, fees, and medical or dental residency
- Loans for covering fees and living expenses for students studying for bar exam or other professional exams
Under What Conditions Do I Have to Take a Relief Test to Discharge My Student Loan?
If your loan doesn’t fall within the scope of the loans above, you may need to file a separate action, known as an adversary proceeding, to have it discharged. The petition requests the court to find that payment of the loan would impose undue hardship on you and your dependents.
West Virginia bankruptcy attorneys say you must prove specific circumstances to have the loan discharged in bankruptcy. During the adversary proceeding, the Department of Justice (DOJ) represents the government in determining whether or not it will agree that you have an undue hardship and:
- If the loan is not discharged and you are forced to pay it, you will not be able to maintain a minimal living standard
- The hardship will persist for a considerable period of the loan repayment
- You attempted to repay the loan by making good-faith efforts before filing for bankruptcy
Courts usually use various tests to determine undue hardship in addition to the above factors. However, your creditors may be present to challenge the request. Your chances of a favorable ruling by the court depend on how well you can argue your case. Experienced bankruptcy attorneys in West Virginia can provide legal counsel and representation to help you navigate the matter.
What Factors Can the Court Consider When Determining Undue Hardship?
At the beginning of the adversary proceeding, the DOJ will require you to fill out an undue hardship attestation. It will recommend that the judge issues partial or complete discharge if it determines you’ll experience an undue hardship. Factors that help the court and DOJ reach a decision are:
- Your current ability to pay: If the court forces you to repay the debt, will you be able to maintain a minimal living standard? If your expenses are equal to or more than your income, the DOJ may determine your current inability to pay
- Future repayment ability: The court will evaluate whether your hardship will continue for a significant amount of time during your loan repayment. The DOJ might determine that you cannot pay in the future if you have a chronic injury, a disability, a long history of unemployment, or are in retirement.
- Good faith effort to repay: Do you have records that show an attempt to repay your student loans before filing for bankruptcy? Attempts to contact the Department of Education or loan servicer about your payment options before filing for bankruptcy could enhance a favorable outcome.
The DOJ may not recommend to the court to have your loan discharged. The court can disagree with the DOJ’s decision and still find that you have an undue hardship and grant your request for relief for your loans.
What if the Court Doesn’t Discharge My Student Loan?
If a court doesn’t find that you have an undue hardship, you can appeal the decision with the help of West Virginia bankruptcy attorneys. They can also help you explore other options for managing your student loan debt. Possible options that can help you out of the situation are:
- Pausing your payments through forbearance or deferment
- Negotiating a settlement with the loan holder
- Lowering your repayments by enrolling in an income-driven repayment plan
A Skilled Bankruptcy Lawyer Helping You Find Relief for Your Student Loan
Discharging student loan debt in bankruptcy can be challenging, but it’s not impossible. Bankruptcy is often considered the last resort, given the impact it can have on your credit history and the cost involved. Nonetheless, if you are struggling with overwhelming student loan debt, you should talk to experienced West Virginia bankruptcy lawyers.
At Hinkle Law, PLLC, we understand how frustrating it is to have creditors come after you demanding repayment while you can’t meet the obligation. Our debt collection attorneys in West Virginia can assess your case and help you take the proper legal steps to discharge your loans through bankruptcy. Call us at (304) 944-0571 or reach out to us online to schedule a FREE case evaluation.