Can i file bk on student loans

You can prove undue hardship by demonstrating that:. Bankruptcy Court. A bankruptcy trustee will be appointed to handle liquidation of assets under Chapter 7, and the repayment plan under Chapter This is called an adversary proceeding, and it will request that the court determine you meet the undue hardship test based on the financial circumstances you provide in your petition.

Hiring a lawyer is a wise decision due to the complexity of discharging student debt in bankruptcy. A knowledgeable lawyer can help draft a strong adversary proceeding and advise on the course of action that will lead to the best outcome for you. That may give you a lower payment, or the option to pay down your loans faster while other debt payments are reduced. After three to five years is up, you could then attempt to discharge the rest of the balance based on undue hardship.

Since bankruptcy can be an expensive and cumbersome process, most experts see it as a last resort for borrowers. But if student loans are your only concern, consider these alternatives. Federal student loans come with a host of important consumer protections, and the most useful for borrowers may be the income-driven repayment IDR program. This limits monthly payments to a percentage of your income and provides forgiveness on the balance that remains after 20 or 25 years.

You can apply online for free at studentaid. If your federal student loans have already gone into default —meaning, at least days past due for most student loans—you can opt for a structured path out of default.

After successfully doing so, the default notation will come off your credit report. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

Find help: Options for legit student loan help resources and organizations to contact. Pause payments: Find out the differences between student loan forbearance and deferment. Get out of default: Learn the consequences of and remedies for defaulting on your student debt. Declare bankruptcy : Explore how to discharge student debt in bankruptcy. Federal student loans are less likely to be discharged in bankruptcy due to their repayment options and strict standards around "undue hardship.

But private student loans don't offer the same repayment options or protections as federal ones. There are also signs bankruptcy for private student loans is getting easier. On July 15, , a New York-based federal appeals court ruled private student loans are not protected from discharge in bankruptcy.

However, because of the potential costs and financial impact of bankruptcy, examine your debt relief options before making a decision. Discharging student loans comes at the end of the bankruptcy process. Find a bankruptcy attorney.

Plus, there are attorney fees for the adversary proceeding required to get student loans discharged. Here's where to find free legal help:.

Student Loan Borrower Assistance : This nonprofit has a list of legal aid organizations by state. Massachusetts Student Loan Bankruptcy Assistance Project : A group of attorneys and law firms offering free representation for adversary proceedings. Oregon Student Debt : A pro bono student loan organization.

File for Chapter 7 or 13 bankruptcy. Prior to October 22, , a student whose defaulted loan was discharged in bankruptcy could not receive loan funds unless the student reaffirmed the discharged debt and made satisfactory repayment arrangements. Because of legislative changes made by the Bankruptcy Reform Act of , the reaffirmation requirement was lifted. Students no longer must reaffirm discharged loans before receiving new loans. In addition, if a student has a loan stayed in bankruptcy, he or she remains eligible for SFA funds as long as he or she has no loans in default including the stayed loan and as long as all other eligibility requirements are met.

Regardless of whether the education loan is dischargeable, the debtor should consider objecting to the claim of the holder of the loan in a Chapter 13 proceeding. This requires the creditor to provide an accounting of the amount owed and any additional charges and fees that were applied to the loan balance. Often lender records are in a state of disarray especially if the loan has been sold and it will be unclear how much is actually owed. The burden of proof is on the lender, not the debtor although it is helpful if the debtor has cancelled checks and other records of payments made.

The judge will then decide the amount that is properly owed. Borrowers are extremely unlikely to successfully obtain an undue hardship discharge in part because Congress never defined what it meant by an undue hardship, leading to arbitrary and capricious bankruptcy court decisions. For example, the Chronicle of Higher Education reported on November 29, that Educational Credit Management Corporation a guarantee agency with expertise in servicing federal education loans of borrowers who are filing for bankruptcy held the federal student loans for roughly 72, borrowers in bankruptcy in , but that only 0.

For example, private student loans do not generally provide borrowers with income-based or income-contingent repayment or with a disability discharge, and forbearances are more limited.

Several members of Congress have attempted unsuccessfully to ease the restrictions on bankruptcy discharge of private student loans. Generally, so long as the family did not sign a promissory note with the college, unpaid tuition bills and other college bills can be discharged in bankruptcy. Whether unpaid tuition bills are excepted from discharge depends on whether they are considered an education loan or a contractual obligation.

Contractual obligations are not. An unpaid tuition bill will be considered an education loan if they are evidenced by a promissory note. A promissory note is an agreement, executed before or at the same time as the transaction, that provides for a definite sum to be repaid by the borrower by a specified date according to a specified schedule, with a specified amount of interest.

When there is no promissory note, bankruptcy courts have held that no loan exists. So whether unpaid tuition bills are considered an education loan will therefore depend on a review of all documents signed in connection with the unpaid tuition bills. BAP that the plaintiff had executed a promissory note and so the debt was not dischargeable.

It is not entirely clear whether a tuition installment plan would be considered an education loan for the purpose of bankruptcy discharge. In most cases the college arranges with a third party to process the billing and payments.

Yet most of these companies specifically state that the tuition installment plan is not a loan and does not charge interest and just charge an up front nonrefundable fee and many offer loans as an alternative.

Note that while a college may withhold official academic transcripts for nonpayment of college bills, as soon as the student files for bankruptcy the college may no longer withhold transcripts during the pendency of the case because of the automatic stay provision of the bankruptcy code.

In addition, wage garnishment must stop. In a Chapter 7 bankruptcy, or liquidation , the trustee will sell off your nonexempt assets. Exempt assets vary by state but often include your primary home, a sensible vehicle, and your personal possessions. The trustee uses the proceeds to pay your creditors as much of your debt as possible, and the court discharges the rest. To file Chapter 7, you must not have had another Chapter 7 bankruptcy discharged in the past eight years.

Also, your current monthly income must fall below the state median or must pass a means test. Certain debts cannot be discharged, such as taxes, alimony, and child support. The whole process can be over in a few months, depending on the complexity of your case. Once your case is complete, you can file for student loan discharge.

Chapter 13, which the U. Repayment is supervised by the trustee, who collects a monthly payment from the debtor and redistributes it to the creditors as outlined in the repayment plan. The bankruptcy court will determine your new monthly debt payments, including your new student loan payment, based on your circumstances.

This might be the case if you have private student loans, which offer fewer options than federal loans when it comes to repayment. In addition to considering which type of bankruptcy is more suitable, there are additional factors to consider before pursuing a bankruptcy filing. Bankruptcy remains on your credit history for up to 10 years. If your credit score was good before you filed, it can take a serious hit after you file. Here's where things get more complicated. As stated earlier, just filing for bankruptcy under either Chapter 7 or Chapter 13 is not enough to have your student loans discharged.

You must take the additional step of filing an adversary proceeding. Under the U. Included in the adversary proceeding paperwork is "a complaint. This additional step is necessary because student loans and a few other types of debt have stricter requirements for discharge than credit card debt, for example. These requirements are described in section a 8 of the U. If you choose to file for Chapter 7, you can file the adversary proceeding right after filing your bankruptcy case.

If you've already gone through Chapter 7 bankruptcy and your case has been closed, you may still be able to file an adversary proceeding to get your student loans discharged. How much time you have to do so depends on where you live and the courts. If your Chapter 7 case is already closed, you must first move to reopen your bankruptcy case.

This is procedural and does not restart the bankruptcy or eliminate the discharge you may already have received for your debt. In a Chapter 13 bankruptcy, when you can file an adversary proceeding also depends on the bankruptcy court rules where you live. Regardless of when you file, your student loan nightmare will not be complete if you win the adversary proceeding. That's because you have to wait until you've completed the necessary Chapter 13 plan payments and earned your discharge order for your other debts before your student loans will be discharged.

If you are allowed to file the AP early in your case, you might get the proceeding over with sooner and obtain a decision on your student loans. The table below compares Chapter 7 and Chapter 13 bankruptcy.

To succeed in having your student loans discharged, you must demonstrate that not having them discharged would cause you to experience "undue hardship.

The problem is that there is no uniform set of conditions. However, your student loan creditors—which may include lenders, servicers , and collection agencies , depending on the types of loans you have and how far behind you are on payments—must also meet specific conditions.

They must also prove that your loans meet the conditions of section a 8. Most states use the Brunner test to determine what constitutes undue hardship. It's based on the case Marie Brunner v. Marie Brunner represented herself and lost.