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Law Office of Gordon Mosley
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Three things you should know about student loans and bankruptcy

Bankruptcy is designed to help those who are struggling financially to get a fresh start. The process offers relief from many forms of debt. Some debts are forgiven almost immediately, while others require additional steps. Student loans are one example.

Can student loans be forgiven in bankruptcy?

Although not immediately discharged, it is still possible to have a student loan forgiven through bankruptcy. Generally, the process requires that the person filing for relief meet three criteria:

  • Payments are high. The first step involves establishing that meeting the required payments would result in an inability to live at a minimal standard.
  • Additional circumstances. In addition to having to deal with high payments, those requesting relief must also establish that there are additional reasons that make it unlikely they will be able to make the payments in the future.
  • Effort counts. It is also important to show that a good faith effort was made to pay off the loan. This can include records of contacting the company holding the loan and attempting to negotiate either a more manageable payment plan or other form of loan forgiveness.

Even if it is not possible to meet these criteria, bankruptcy can still be beneficial. One benefit involves the end of harassment. Once approved for bankruptcy, creditors are required to cease contacting the applicant. Any attempt to make contact through phone calls or mailings demanding payment can result in repercussions to the creditor.

A second benefit involves the forgiveness of other debts. Having other debts forgiven during bankruptcy can free up funds to pay off remaining debts that may not qualify - like student loans.

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