Can i file bankruptcy because of student loans

However, if you can prove that repaying your student loans would cause an undue hardship to you, you can get rid of your student loans in bankruptcy. To have your student loan discharged in bankruptcy , you must demonstrate that it would be an undue hardship for you to pay them. The test for determining undue hardship varies between courts. Also, many courts look at the undue hardship test as all or nothing—either you qualify to get the whole loan discharged, or you don't.

Other courts have discharged a portion of a debtor's student loan. Regardless of the test used, most courts are reluctant to discharge a student loan. However, if you have very low income or your loan is from a for-profit trade school, you might have a better chance. Some courts use the Brunner test. Under this standard, you can discharge your student loan if you meet all three of these factors:. Other courts use the totality of the circumstances test. Here, the court will look at all relevant factors in your case to determine if it is an undue hardship for you to repay your student loan.

There are other tests, such as a special test for Health Education Assistance Loans HEAL in which you must show that the loan became due more than seven years ago and repayment would impose an "unconscionable" burden on your life. Other courts use other tests, too. To find out the test used in your jurisdiction, talk to a local bankruptcy attorney.

If you want to try to discharge your student loan in bankruptcy, you must file an adversary proceeding to determine dischargeability with the bankruptcy court. But that's not all. You'll need to present evidence and prove to the court that payment of your loans will cause an undue hardship. It's likely that you'll need to retain an expert to testify about your ability to be gainfully employed in the future.

You might have defenses to payment of your student loan debt, particularly if you attended a vocational or trade school. Examples include breach of contract, unfair or deceptive business practices, or fraud. If you succeed, you won't owe the debt at all, making the dischargeability issue moot. You'll find the Brunner test or other standards applied to Chapter 7 and Chapter 13 debtors in lots of court cases.

Knowing how the court in your jurisdiction ruled previously could help you determine the likelihood of your success. If you have a substantial amount of student loan debt, it might be worthwhile to consult with a local bankruptcy attorney. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads.

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Qualifying for Loan Bankruptcy Discharge. Alternatives to Bankruptcy. By Casey Bond. Casey Bond is a Certified Personal Finance Counselor who has written about loans, banking, mortgages, and other personal finance topics for more than 10 years.

You can find her work on HuffPost, Money. Learn about our editorial policies. Key Takeaways Federal student loans are considered non-dischargeable in bankruptcy unless you can prove they cause you undue hardship. There is no single official benchmark to determine undue hardship, but most bankruptcy courts rely on the Brunner Test, which is extremely difficult to pass.

Article Sources. Your Privacy Rights. To change or withdraw your consent choices for TheBalance. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. Bankruptcy can be an effective way to escape crushing debt if you have a good case. Committee on the Judiciary. Dick Durbin, U. Senator D-Ill. Federal Student Aid. United States Courts. Consumer Financial Protection Bureau.

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Personal Finance. Your Practice. Popular Courses. Loan Basics Student Loans. Part Of. What You Need to Know. Ways to Pay Off Loans. Loan Forgiveness. Loans Out of Control? Table of Contents Expand. What Is Student Loan Bankruptcy? How Student Loan Bankruptcy Wor? Decide How You Are Filing. Filing for Student Loan Bankruptcy. When to File an Adversary Proceeding: Chapter 7. When to File an Adversary Proceeding: Chapter Federal Loans and Hardship.

Special Considerations. The Bottom Line. Key Takeaways Under U. Getting student loans discharged in bankruptcy requires an extra step to file an "adversary proceeding.

A bankruptcy specific to student loans does not exist. The IRS may keep any tax refund and apply it to your federal loans if they are in default. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate.

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