One of the biggest financial burdens we bear are student loans. If you’re contemplating filing for bankruptcy, it’s likely that you will not be able to rid yourself of student loans with a Chapter 13 or 7 bankruptcy, unless you’re able to prove to the court that repaying your student loans would be an excessive financial hardship for you.
The Undue Hardship Exception
Some courts will use a variety of tests to determine whether or not paying your student loans would be an undue hardship. Although many courts are somewhat hesitant and reluctant to completely wipe your loans, they may make an exception – depending on your income and the type of school you attended.
One test the court can use to discharge your student loans is the Brunner Test. You must meet the following factors:
- Poverty: You are unable to uphold a minimal standard of living
- Persistence: It’s likely that you’re current economic situation will linger for the extent of the repayment period
- Good faith: There’s proof that you’ve made good effort in trying to repay your loans
What Happens if My Student Loans Are Not Discharged?
There are a number of things that can happen if you find that your loans will not be discharged, depending on the type of bankruptcy you’re filing. For Chapter 7 bankruptcies, you’ll still need to repay your student loans even after your bankruptcy case is finalized and over.
Chapter 13 bankruptcies offers a couple more options. Under a Chapter 13 bankruptcy, you may be eligible to reduce the amount of your scheduled student loan payments and pay back only what you can afford at the time while you work to build up your finances and income. Once the repayment period ends, however, you will still be held accountable for whatever amount is left of your student loans.
If you’re facing a serious financial hardship and contemplating filing for bankruptcy, be sure to do so with an experienced and skilled bankruptcy lawyer on your side. Economic burdens can oftentimes feel overwhelming, but our Rancho Cucamonga bankruptcy attorney can provide you with trusted counsel when you need it most. Call Nguyen Law Group today at (909) 328-6280 to get started.