The price of college education in the United States is so high that many people are forced to take out student loans to cover costs. If you’re struggling with debts you can’t seem to pay off, filing for personal bankruptcy can help. However, only certain types of student loans may be discharged through bankruptcy and only under strictly defined circumstances. Get the facts below.

Understanding Consumer Versus Non-Consumer Debt

Consumer debt is defined by the Federal Bankruptcy Code as being incurred by an individual "primarily for a personal, family, or household purpose." Non-consumer debt, on the other hand, is incurred for business ventures or endeavors motivated by profit.

In cases where student loans are seen as consumer debts—for instance, if you took out loans to pay tuition, which arguably gets you ahead in your career—they can’t be discharged. You may still file for personal bankruptcy to get rid of other debts like credit cards, allowing you some financial reprieve.

Discharging Student Loans Using the Means Test

As with any rule, there are exceptions. You can get federally subsidized or private student loans discharged if you’re able to demonstrate through a means test that trying to pay them off will create undue hardship.

Three conditions must be met. First, you must prove that you wouldn't be able to maintain a minimum standard of living if you paid back the loans. You must also show that your current financial situation is expected to persist over the loan repayment period. Finally, you must demonstrate that you tried to repay the loans before filing for bankruptcy.

If you’re uncertain whether you meet the criteria outlined in the personal bankruptcy means test, consult Donald L. Spafford, Jr., Attorney at Law. Located in Honolulu, HI, this law firm has more than 30 years of experience handling Chapter 7 and Chapter 13 bankruptcy filings. Review their services online, and schedule a free initial consultation by calling (808) 532-6300.