One of the most common misconceptions about bankruptcy is that student loans are never dischargeable. The truth is, although it only happens in limited cases, it is possible to get rid of this type of debt. The key is to show your loans are causing undue hardship. Although it’s quite challenging for most people to qualify for the dismissal of student loans, it may be worth considering if you’re struggling to make the payments. Below are the steps you need to take if you wish to include student loans in a bankruptcy.
What You Need to Do to File for Student Loan Bankruptcy
Consult With an Attorney
Even though an attorney isn’t required to file bankruptcy, you should work with one to guide you through the complex process. Before you file, they will evaluate the financial situation to determine your eligibility for student loan dismissal. If they decide it’s something you should pursue, they will help complete all the necessary paperwork and make sure the case is properly prepared for court.
Choose Which Chapter to File
Before filing, you must also figure out whether to file for a Chapter 7 or Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, you must pass a means test that shows you don’t have the income to pay off your debts. If approved, the student loans will be eliminated. A Chapter 13 bankruptcy will allow you to reorganize the debt into affordable payments for three to five years. After the designated time has passed, you may no longer be responsible for paying off the balance of the loans.
File an Adversary Proceeding
Requesting a student loan discharge requires an extra step in the bankruptcy process. You will need to file an adversary proceeding for consideration of discharge with the bankruptcy court. This petition will provide an outline detailing how you meet the undue hardship criteria. Once you submit this, the case will enter into litigation.
Gather Evidence to Prove Undue Hardship
You will need to present evidence to the court that supports the claim of undue hardship. In the majority of cases, the court will use the Brunner test to decide if you qualify for student loan dismissal. This means you must prove that continuing to pay the loans won’t let you maintain a minimum standard of living, the hardship is not likely to change, and you made a good-faith effort to pay back the debt.
If you have exhausted all other avenues for managing student loans and believe you can establish undue hardship, bankruptcy may be the best option. To improve the odds of successfully discharging your debt, you will need an experienced bankruptcy attorney. For almost two decades, The Gil Law Firm has helped Dothan, AL, residents achieve debt relief and regain financial freedom. Contact them at (334) 673-0100 or visit their website to learn more about their services.