Can You File Bankruptcy on Student Loans?

Can You File Bankruptcy on Student Loans?

If you are wondering “can you file bankruptcy on student loans,” then you’re not alone. Many, many students take out large student loans during college and then struggle to pay them back. That’s because college tuition seems to increase significantly each year, but annual salaries for jobs just out of college don’t pay enough to meet monthly student loan repayment obligations. It’s a trap that many people fall into.

While in most instances student loans cannot be discharged through bankruptcy, there are some narrow circumstances in which a discharge can happen. Your best bet is to ask our Cape Girardeau bankruptcy attorneys to review your case and discuss whether you qualify for this exception. This is the most accurate way of determining whether your student loan can be discharged through bankruptcy. At Birk Law Firm, we would be happy to answer your questions and explain the legal issues involved. Call us at 573-332-8585 for a free initial consultation.

Discuss your case with a student loan bankruptcy lawyer

Rather than spending hours on the internet reading articles about discharging student loans through bankruptcy in Missouri, it’s much easier to make a quick phone call to discuss your case with a student loan bankruptcy lawyer. Laws can be difficult to interpret if you’re not a practicing attorney.

Student loans are notoriously difficult — but not impossible — to discharge in bankruptcy. To do so, you must show that payment of the debt “will impose an undue hardship on you and your dependents,” according to Student Loan Borrower Assistance at the National Consumer Law Center. Courts use different tests to determine whether an individual borrower has established undue hardship.

The most common test is the Brunner test. It requires a showing that:

  1. The debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for himself or herself and dependents if forced to repay the student loans.
  2. Extenuating circumstances exist indicating that this state of affairs is likely to persist for a significant amount of the student loan repayment period.
  3. The person has made good faith efforts to repay the loans. (Brunner v. New York State Higher Educ. Servs. Corp., 831 F. 2d 395 (2d Cir. 1987).

Courts, including appellate courts, continue to evolve in their thinking and decisions about discharging student loan debt. Whether a student loan is discharged due to hardship is not automatically determined in the bankruptcy process, meaning that you must file a petition — called an adversary proceeding — to get a determination.

Examples of undue hardship ruled upon by courts include:

  • A middle-aged man trapped in a cycle of poverty earning $8.50/hour and barely able to provide the minimal necessities for his family.
  • A college-educated married couple who lived near the poverty line even though they both worked in worthwhile but low-paying jobs. Despite a frugal lifestyle, their expenses exceeded their earnings by $400 a month.
  • Individuals who showed that they did not benefit from their education or attended a fraudulent college.

These are just a few examples of the kind of hardship that courts have encountered and issued rulings on. The law continues to be interpreted by additional courts each year. The issue is increasingly on everyone’s radar screen as more and more young people struggle with overwhelming student loan debt.

Can you file bankruptcy on student loans in Missouri?

You are required to list all of your debts, including your student loans, among the creditors in your bankruptcy filing in Missouri, but simply listing it doesn’t mean that the student loan will be discharged. The threshold for proving that the loan creates an “undue hardship” is high and many student loan holders cannot meet it. For the loan to fall into this category, it has to be more than inconvenient or burdensome. The debt must make meeting daily living expenses – like food, shelter and transportation — almost impossible.

A skilled student loan bankruptcy lawyer can take a look at your monthly student loan payments, your daily living expenses and your monthly income, and he can advise you whether it’s likely that you meet the “undue hardship” threshold. If you do, he can help you pursue a discharge through bankruptcy. If you don’t, you may simply have to find ways to economize so you can pay your student loan. After all, if college student loans were easy to discharge through bankruptcy, then there would be little incentive for students to pay back the loans.

Contact a student loan discharge lawyer today

If you are overwhelmed with debt and are struggling to make even minimum monthly payments on credit cards, a home mortgage and student loans, it may be time to consider bankruptcy as a way to make a fresh start. Most unsecured debt – like credit cards and personal loans – can be discharged through bankruptcy. You may or may not qualify to have student loan debt discharged. In most cases, student loans cannot be discharged through bankruptcy. You must meet an “undue hardship” threshold to be considered for such a discharge.

A skilled and experienced student loan discharge lawyer can review your case and advise you about whether or not you may qualify for this exception. While you shouldn’t get your hopes up, there are some narrow circumstances in which a student loan discharge can take place. Regardless, bankruptcy might be a good choice for you as a way to eliminate other debt that you are struggling to repay. Bankruptcy can be a way to turn over a new leaf and establish yourself on a firmer financial footing. To find out more about how we can help, contact Birk Law Firm at 573-332-8585. The initial consultation is free.