Student Loans: Evaluating Your Options in Bankruptcy

Generally speaking, you cannot get rid of student loans by claiming bankruptcy. Many believe that this is the easy way out, but learn soon enough that they are not able to escape this debt. Even if you file for bankruptcy you will still be responsible for the debt.

Undue Hardship Exception

Although most student loans are not eligible for discharge through bankruptcy, there is an exception to the rule. If you can prove that the payments put a financial burden on you, it may be possible for them to be discharged. To prove this, you need to do three things:

  • show that you cannot continue to pay your loans and maintain a minimum standard lifestyle
  • show that you made all efforts possible to pay back your loans
  • show that your financial situation will continue

Chapter 13 Consolidation

Although you may not be eligible to have your student loans discharged, under Chapter 13 bankruptcy it is possible to consolidate them. You can spread out the payments and combine the student loan debt with other debt. This is a good way to lower your payments and stop creditors from harassing you at work and home for payment.


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