When student loans are causing financial struggles, many question whether bankruptcy will help. Fortunately, the answer to this question is maybe. More than likely, most Florida residents have heard that student loans cannot be discharged through bankruptcy. That might be true in many cases, but there is a procedure for seeking student loan debt relief in both Chapter 7 and Chapter 13 bankruptcy, which are the most common chapters filed by individuals.
In a Chapter 7 bankruptcy, it will be necessary to file what is called an “adversary proceeding” in order to attempt to have student loans discharged. Three basic circumstances are often required to show that paying the loans would create “undue hardship” for the borrower. If a Florida resident is unable to keep up a legally defined minimum standard of living due to health issues or a disability, the loans might be discharged. However, the court will more than likely want to know that the filer made a good faith effort to pay back the loans prior to filing the bankruptcy and adversary proceeding.
In a Chapter 13 bankruptcy, the court and trustee will determine how much will be paid on the loans each month during the term of the repayment plan. As long as the filer is able to keep up with the payments, the case should not be dismissed. At the end of the three to five year repayment term, any debt remaining will be paid in accordance with the loan agreement.
To say that it is impossible to find student loan debt relief through bankruptcy would be inaccurate. However, the process can be challenging and complex. It would not be advisable to attempt to go through either Chapter 7 or Chapter 13 bankruptcy without an attorney under ordinary circumstances. When attempting to have student loans discharged, having that advice and guidance becomes even more important.
Source: nerdwallet.com, “How to Get Your Student Loans Discharged in Bankruptcy“, Devon Delfino, June 30, 2016