Your Student Loan Debt CAN be Discharged Through Bankruptcy

Bankruptcy, Chapter 13, Chapter 7, Consumer bankruptcy, Credit Repair, Student Loan / By sflynn1004

There has been long a perpetuating myth that student loan debt in America cannot be wiped out by declaring bankruptcy. The truth is quite the opposite. A court can grant you a discharge provided you can prove it is causing you ‘undue hardship’.

Courts will use different tests to evaluate whether it might be causing you undue hardship. The commonly used is the Brunner test. Passing it requires you to prove that:

1. You and your dependents are unable to maintain the ‘minimal’ standard of living because of the debt

2. Additional circumstances exist that will make such a state of affairs to persist for a long period

3. You had made real effort to repay your student loan debt.

On the surface, this does make it seem that qualifying for a discharge might be difficult, but an empirical student from Villanova University found that judges have granted a hardship discharge to 40% of debtors who sought one.

In such a context, it may be surprising to find that 99.9% of debtors who have filed for bankruptcy don’t even attempt to discharge their student loans. With more and more individuals suffering from mounting student loan debt, it remains highly critical to raise awareness about how it could potentially be wiped out.

Link to the study: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1894445

#bankruptcy #chapter13 #chapter7 #studentloans

Photo courtesy: www.aboblist.com / CC2 (In comments)

Student Loans and Bankruptcy

Bankruptcy, Chapter 13, Chapter 7, Consumer bankruptcy, Student Loan / By sflynn1004

When someone considers the option of going bankrupt, they are definitely in the most difficult situation and they cannot pay off their debts. However, when it comes to student loans, we have often heard that it cannot be discharged through this process. Well, it is high time that we start understanding student loans and bankruptcy in combination so that one can analyze if it is an option that they should go with or not.

Student loans can be discharged through a bankruptcy case by proving ‘Undue Hardship’ and this is one of the reasons why people get confused because the process itself is not that clear. While you know that this is what you need to prove in court, there is no set of rules which every court and judge has to abide by. Hence, most people are unaware when the question arises that ‘how to prove undue hardship for student loans?’

As stated, there is no set of rules, but we do know that if not all, at least most of the judges do follow a specific test, i.e. the Brunner test to determine whether someone is applicable for student loans and bankruptcy or not. We will now look at the 3 major things that the borrower needs to prove to pass the Brunner test on which the decision of the judge relies.

Minimum Standard of Living

The first and foremost thing that you need to prove in a court is that if you were to repay the loan amount, you will not be able to maintain the bare minimum standard of living for yourself and those dependent on you. Now, it is not necessary that only people who fall under the poverty line would qualify for this. However, it depends on the judge who is handling your case and what they think about your current living conditions.

Additional Circumstances

There can be additional living conditions for you or people that are dependent on you that can add on to the fact that you cannot earn more and pay your student loan. This can include any mental or physical illness, poor quality of education, and the fact that you have reached the highest-earning that you can make and are still incapable of generating enough money.

Good Faith

The last point which is also very significant is that the judge should know that you have tried your best until now and that bankruptcy is the only option left. For example, you can ask for a repayment plan with less interest rate before you apply for bankruptcy to show the legitimacy of your intentions.

While the Brunner test is followed by most courts, it is not a set standard and so you need to consult a lawyer in your area beforehand to have enough knowledge about this and other things such as the need of filing the adversary proceeding, knowing which option is better for you, i.e. bankruptcy chapter 7 or 13, and to have an estimate of how much will the bankruptcy itself will cost you!

For more information, speak with an experienced bankruptcy attorney - schedule your free 1-hour consultation today: https://seanflynnlaw.com/calendar/

Colorado Couple Sees $200,000 in Student Loans Forgiven

341 Meeting, Adversary Proceeding, Bankruptcy, Chapter 13, Chapter 7, Consumer bankruptcy, Credit Repair, Student Loan / By sflynn1004

Colorado Couple Sees $200,000 in Student Loans Forgiven

It is not often that you see student loans being discharged when a person files for bankruptcy. In fact, it so rarely happens that a lot of people have come to mistakenly believe that it is an unforgivable debt. This, of course, makes the new ruling by the U.S. Court of Appeals for the Tenth Circuit in favor of a Colorado couple all the more newsworthy. Rejecting the claims made by the student loan giant, Navient, that the couple’s debt was non-dischargeable under bankruptcy law, the court wrote an amount of $200,000 off of their student loans.

“This has been a huge part of my life for so many years now … It affects your whole life. It affects your relationship with your kids, your marriage — everything”, Paige McDaniel (wife) told the news. In another interview, she also told that the loan company had threatened to garnish her wages to recoup the debt before the couple filed for bankruptcy.

The ruling sets a precedent, a loosening of the student loan discharge law that erstwhile have been very rigid its interpretation. It also months after a separate ruling was made in favor of another student loan borrower, Kevin Rosenberg, who saw more than $200,000 of student loan debt discharged under Chapter 7 bankruptcy.

As of current, there are some 45 million Americans saddled with student loan debts, representing a combined amount of more than $1.6 trillion.

#Chapter7 #bankrutpcyNews #StudentLoans #USNews #USlaws #BankruptcyLaws #LegalNews #Newsoftheday

How to Manage Your Student Loan Debts Using Chapter 13 Bankruptcy

Leave a Comment / Bankruptcy, Chapter 13, Student Loan / By sflynn1004

Across the United States, an increasing amount of young people are graduating from universities heavily indebted with student loans. The total student debt in the country right now stands at an astonishing $1.5 trillion and the figure continues to rise rapidly. The current bankruptcy laws make it extremely difficult, if not impossible, to discharge your student loan debt.

However, that doesn’t mean filing for bankruptcy still won’t be worthwhile if you are struggling with repayments. Here is how to manage your student loan debts using Chapter 13 bankruptcy.

Benefit of Chapter 13

When you filed for bankruptcy, the court will immediately grant an automatic stay period that extends until the completion of the bankruptcy process. During the automatic stay period, all debt collection activity, including that of your student loan debt is prohibited, meaning you will not be harassed by your lenders to make regular repayments on your outstanding debt.

Instead, the court will create a new repayment plan for the duration of the bankruptcy (usually 3 to 5 years) based on your ability to afford. Since student loans are considered non-priority unsecured debts, you will not be required to repay the debt in full by the end of the duration.

Depending on your circumstances, the actual amount you would need to pay monthly could be significantly lesser. If the court determines that you have little or no disposable income than you probably won’t be required to pay any amount towards your student loan debts throughout the stay period.

A Word of Caution

Keep in mind that interest will still continue to accumulate on your student loans during the duration of the bankruptcy. In some cases, this could translate to a considerable amount you’ll have to pay back once the automatic stay period expires.

Another thing to be aware of is that the court’s meaning of “what you can afford” may differ from your own. It is not unheard of for filers to be given a plan which may heavily compromise their lifestyle. The aid of a seasoned attorney is vital to make sure the outcome is more in your favor.

Concluding Note

If you fail to repay your creditors on your student loan debts, the consequences could be terrible. It could severely hurt your credit score, you could be subject to a lawsuit, or have your wage garnished. Filing for Chapter 13 Bankruptcy can make repayments on your student loan debts much more manageable and help you avoid such predicaments.

More information on how the Federal Reserve’s recently lowered rates impact preexisting debt and refinancing options.

5 Things You Should Know Before Declaring Bankruptcy on Student Loans

Leave a Comment / Bankruptcy, Chapter 13, Chapter 7, Student Loan / By sflynn1004

Declaring Bankruptcy on Student Loans

Student loan debt is on the rise across the country as students take in more and more loans to finance their rising tuition fees. In fact, Americans collectively own more than $1.5 trillion in student debt, and the figure is still rising. If you are struggling with managing your student debt, you may wish to file for bankruptcy. However, there are some things you should know before declaring bankruptcy on student loans.

1. Qualifying for Chapter 7 Is Difficult

To file for chapter 7 bankruptcy, you must first make sure you are eligible for it by passing the means test. The income requirements often disqualify many bankruptcy filers from filing under this Chapter.

2. Filing for Bankruptcy Won’t Guarantee a Debt Discharge

Even if you qualify for Chapter 7, you would still have to prove to the court that you are not in the position to pay your student loan debt. You will have to convince the judge that the debt is inflicting extreme hardship on your well-being and that your financial situation is unlikely to change in the near future. As one would expect, cases that win out are quite rare. Filing under Chapter 13 is easier, but it would only reorganize your repayment plans based on your judged ability to pay back the loan.

3. Filing Bankruptcy Is a Stressful Process

It should be stressed that filing for bankruptcy is a lengthy process. Debt discharge can take up to 4 to 6 months under Chapter 7 - that is if you win at court. During the process, you will have to manage finances for the legal fees involved, as well as go through a lengthy list of paperwork. Therefore, seeking the advice of an experienced attorney can help ensure your case is successful. Don’t be discouraged though. While your student loans may not be discharged and the process may be stressful - you may still be able to get some relief. Bankruptcy can eliminate your other debts freeing you up to tackle your student loans or allow you to put them in a reorganization plan. For some loans, there may even be an income-driven repayment program you can avail yourself of in conjunction with your bankruptcy case.

4. You Can’t Hack Your Way out with a Credit Card

Some clever-mind students may think that they can cheat the system by putting all their student debt on their credit card and then file for its bankruptcy. However, such an attempt would be categorized as fraud. If the court thinks that the attempt was deliberate, expect some negative consequences.

5. It Will Impact Your Financial Health

A completed bankruptcy can linger on your credit report for up to 10 years, impacting your financial health. This may sound discouraging, but not filing for bankruptcy and allowing your debt issue to worsen would also negatively impact your credit score. Discharging your debt allows you to start anew with a clean slate, and many are able to rebuild their financial well-being even before the bankruptcy gets dropped off their report.

Get Legal Help

If you fail to plan, you plan to fail. As mentioned before, filing for bankruptcy is a tiresome process and the court case will not always result in your favor. Therefore, a qualified legal attorney is essential for helping you navigate successfully through the figurative legal labyrinth.

At the Law Offices of Sean T. Flynn, PLLC in Austin, TX, I offer personalized legal assistance for filing under Chapter 7 and Chapter 13 the bankruptcy code. With over 8 years of experience in the profession, you can be sure to obtain a satisfactory resolution in a bankruptcy case. Call + 512-640-3340 or contact me online to schedule an appointment.

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