How to Secure Student Loan Forgiveness in Bankruptcy

Chapter 7 bankruptcy allows struggling individuals to discharge many of their debt liabilities but rarely permits student loan forgiveness. In certain situations, however, a debtor may be eligible to receive a student loan discharge through bankruptcy based on his lack of financial resources.

The Undue Hardship Discharge

The only way to obtain student loan forgiveness in bankruptcy is through an undue hardship discharge. Individuals requesting an undue hardship discharge must prove that making the required monthly payment to their student loan providers would place them and their families under extreme financial stress. In addition, a debtor must demonstrate to the court that his lack of income is not likely to improve at any point in the future. Undue hardship discharges are awarded only to individuals who have made past attempts to pay their student loan debts.

The Court’s Decision

Case law regarding undue hardship discharges for student loans can go either way. Thus, it is ultimately the judge’s decision whether the individual has provided sufficient proof of his dire financial circumstances and his good faith attempts to pay off his outstanding student loan balance. Those interested in requesting an undue hardship discharge through bankruptcy should obtain legal counsel before filing a bankruptcy case, as the request for loan forgiveness should be filed in conjunction with the formal bankruptcy petition.


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