subject: Discharging Your Student Loans Via Bankruptcy [print this page] Discharging their debts is why ninety plus percent of people file for bankruptcy. Of all the loans that are hard to get rid of in a bankruptcy, student loans are near the top of the list. Congress has set up the student loan programs to provide a lot of flexibility to students in paying back their loans. Congress has also asked the private institutions and creditors that provide the loans to be extremely flexible in collecting the loans.
But, the flexibility came with strings attached. In return for this flexibility, they made it clear to the bankruptcy judges that they were serious in expecting these loans to be repaid. The courts, taking their cue from Congress, will require that you show extreme hardship in order to have your student loan discharged. And it rarely happens.
Based on the rules for extreme hardship, it is difficult for a person to prove. But you will need to do this if you want a chance of getting your student loan discharged. To start with, you will have to file a separate court action to show that you are experiencing extreme hardship.
If you don't have legal training and are not used to spending a lot of time in the law library, you will probably find it best to hire an attorney to file your hardship motion. Because if, for whatever reason, the court doesn't rule for you, it won't even be worth filing for bankruptcy to get your student loans dismissed as it will almost certainly be denied. If, however, the court rules in your favor, then you at least have a chance of prevailing in bankruptcy court. It is best, however, not to get your hopes up.
When making the determination as to whether you meet the qualifications to be considered a hardship case, the courts look for certain things. The first thing they base their decision on is your income and expenses. If you can demonstrate to them that you are not even capable of maintaining even the barest of living standards, you will probably meet this first test.
A perfect illustration of a hardship case would be a person who has graduated from college, got a job, and bought a home. And due to certain circumstances, loses his homes and is now homeless. The second criteria is that your current situation shows no sign of changing. In other words, if you are homeless but have just began working at a job that could soon get you off of the streets, then your prospects are looking up and your request for hardship is likely to be denied.
Before ruling in your favor, the third thing that the bankruptcy judge will want to see is proof that you have honestly made multiple tries to repay the debt. But, if you have not even made an attempt to look for employment or work at a job, your case will probably fail. But, if you meet all three of these conditions, you have a good chance of winning your hardship case.
