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Can I discharge my student debt if I declare bankruptcy?

If you are suffering from financial distress caused by your student debt, you are not alone. Many Americans have a considerable amount of debt that they cannot pay without a severe struggle, which is why some seek help from the bankruptcy system.

As a rule, the bankruptcy system does not discharge federal student loan debt, but there are some exceptions. The U.S bankruptcy code states that it is possible to discharge your student debt in bankruptcy if you file a separate action called adversary proceeding. With this request, the bankruptcy court could eliminate your student debts if they consider that the repayment of these will bring undue hardships on you or your dependents.

How is undue hardship determined?

Congress did not define what constitutes an undue hardship, so there is no sure way to know if you are eligible for this proceeding. However, the office of Federal Student Aid says that the most common factors that the bankruptcy court looks at are:

  • You will not maintain a minimal life quality and standard if you repay the total amount of the loan.
  • There is evidence that the hardship will continue for a significant portion of the loan repayment period.
  • You have made previous efforts to repay the loan before filing for bankruptcy.

If the bankruptcy court dictates that your case applies with one of the previous situations, then your loan might be fully or partially discharged. It might happen that they don´t eliminate your debt at all, but they can give you the opportunity of paying your loans with a lower interest rate.

Rethinking bankruptcy

The discharge of student loans is not that common. Nonetheless, an effective bankruptcy can help you eliminate other debts you may have, which could ultimately make it possible and easier for you to pay your student debts. Whether or not you achieve student loan forgiveness, filing for bankruptcy can take a significant weight off your shoulders and improve your life immensely.