Increasing Your Chances Of Discharging Your Student Loans Through Bankruptcy

Posted on: 25 April 2016

Students loans have a reputation for being nearly impossible to discharge--even through bankruptcy--and so most individuals do not even bother to try. In reality, however, studies have shown that as much as 40 percent of the only .1 percent of all student loan holders who sought to have their loans lowered or eliminated succeeded, meaning nearly half of those who applied had their burden lessened. If you truly do not have the ability to pay your loans and can demonstrate this hardship, it may be worth your time to have your case examined by a bankruptcy attorney. These four factors can determine the viability of your student loan bankruptcy claim, and you will need to meet all of them to overcome the inherent difficulty of an adversarial process.  

Attempting to Adjust Your Payments

Before you can credibly assert that your loan payments are unfairly high, you must show that you have attempted to have your payments lowered through the proper avenues first. Federal loan payments are often negotiable based on your employment status, income, and other considerations. You may even be able to delay your payments completely until your finances are in better shape. Private loans, on the other hand, are often non-negotiable. If you have explained your circumstances to your private lender and been denied accommodations, you may have grounds to file for chapter 13 bankruptcy to negotiate more reasonable payments. 

Demonstrating Financial Vulnerability

You are more likely to have your loans lessened or released if you are unemployed or underemployed, earning significantly less than your degree would suggest. In extreme cases of undue hardship, you may be able to discharge your loans entirely through a chapter 7 bankruptcy, while less severe situations may simply see them reduced. You will need to compile evidence of your current financial situation, including any income, investments or other debts you have incurred, as well as documenting your basic living expenses and any public support you rely upon. 

Proving Medical Hardship

If you are suffering from a serious medical condition while also undergoing financial difficulties, you are more likely to receive a favorable ruling in your bankruptcy claim. You cannot fabricate an illness, of course, but if a long-term disability or disease has impacted your earning potential and is likely to continue doing so for the foreseeable future, you should obtain medical records from your doctor and include them as part of your appeal. This may also include psychological conditions that negatively affect your ability to attain or hold down a job. 

Battling an Adversarial Process With the Right Help

Even with a clear and compelling case for discharging your student loans, you will likely fail without the help of an experienced bankruptcy attorney; it is, after all, still an adversarial process, and your lender may attempt to contest your claim legally. If you are already going through the bankruptcy process and wish to include your student loans for consideration, consult with your attorney about the feasibility of your case. Every bankruptcy court interprets the law differently, so you should rely on the expertise of your attorney to determine whether or not your claim has a reasonable chance in your area. With all of the prior listed evidence in hand, however, you can ensure that you will receive the most informed and objective opinion possible and present a strong case for the court. 

For further assistance, contact local professionals, such as those from Morrison & Murff.