Things to Know About Student Loans and Consumer Bankruptcy

While federal student loan payments remain paused, many consumers may not be thinking about how their financial circumstances will be affected once those student loan payments resume. Yet it is important to consider federal student loan payments in relation to the rest of your debt, especially if you are struggling to make payments on medical debt, credit cards, and your car or mortgage payment. Moreover, consumers with private student loans have not had their payments paused, and many are struggling to make those regular student loan payments. Can consumers with federal or private student loans get those student loans discharged in bankruptcy? The following are some of the top things you should know about student loans and consumer bankruptcy.

Student Loans are Not One of the Types of Non-Dischargeable Debts

Many people have misconceptions about student loan debt and the bankruptcy process. Indeed, many consumers mistakenly assume that student loans are one of the types of debts that are non-dischargeable (i.e., debts that are ineligible for discharge) through the bankruptcy process. It is essential to know that there are some types of debts that cannot be discharged through bankruptcy, but U.S. bankruptcy law does not include student loans as a type of non-dischargeable debt.

You Could be Eligible to Have Your Student Loans Discharged if You File for Consumer Bankruptcy

Given that student loan debt is not a type of non-dischargeable debt, it is important to know that you could be eligible to have your student loans discharged if you file for personal bankruptcy. While the process is more complicated for getting student loans discharged in bankruptcy than other types of unsecured debt, it is certainly not an impossible task.

You Will Need to Show Undue Hardship

In most bankruptcy cases, in order to have your student loans discharged, you will need to show the three elements of the “Brunner test,” which determines whether a person’s student loans can be discharged because of undue hardship. The three factors of the Brunner test include:
  • You cannot maintain a minimal standard of living if you make student loan payments;
  • Your current financial circumstances are likely to persist; and
  • You have made a good faith effort to make payments on your student loans.
Rules for Student Loan Discharge in Bankruptcy Could Change in the Future

While debtors seeking to discharge student loans must currently prove an undue hardship in order to have their student debt discharged, you should know that the way in which student loans are handled in bankruptcy cases could change in the near future. Indeed, if the Fresh Start Through Bankruptcy Act passes, it would be much easier for debtors to discharge student loans in bankruptcy.

Contact Our Oak Park Bankruptcy Attorneys

If you have questions about discharging student loans in bankruptcy, or if you need general assistance with your consumer bankruptcy case, one of our experienced Oak Park bankruptcy lawyers can speak with you today about your circumstances. Do not hesitate to get in touch with our firm to find out more about how we can help you with your case. Contact the Emerson Law Firm to learn more about our services.


See Related Blog Posts:

Consumers Who Own Small Businesses and Want to File for Bankruptcy

Mistakes to Avoid in Your Consumer Bankruptcy Case

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