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Federal Student Loans In Bankruptcy

You may be wondering how federal student loans are affected in bankruptcy – how easy it is to discharge them, and whether you're still eligible for loans if you've filed bankruptcy. Typically, it's difficult to get federal student loan debt lessened via bankruptcy, but there is a way. By showing undue hardship, it may be possible to get loans discharged.

Bankruptcy can complicate your issues with student loans, but you may benefit from speaking to somebody with a better idea of the bankruptcy laws in play. Fill out the following form to get in contact with a local lawyer for a free consultation.

Discharging Federal Student Loans in Bankruptcy

Typically, federal student loan debt is not able to be discharged or eliminated by filing bankruptcy. However, in certain cases you may be able to have some of your student loan debts discharged by proving that paying these loans would cause you undue hardship financially.

Undue hardship is a term for a legal standard regarding bankruptcy and debts. To show that federal student loans are causing you undue hardship, you should be able to prove the following things:

  • Based on your income and expenses, you are unable to maintain a "minimal standard of living" if you are forced to repay the entirety of the loans. This is typically the easiest qualification to meet, although the "minimal standard" may be up to the court's discretion.
  • Other circumstances indicate that your financial situation is unlikely to improve during the course of the loan. These circumstances can include disability, particularly one that prohibits you from performing the type of work associated with your higher education, as well as other extenuating factors.
  • You have made a good faith effort to repay the loans. In addition to a record of making loan payments, this may include efforts such as trying to increase your income, minimize your living expenses, or consolidating your loans through the Federal Direct Loan Servicing Center.

These three qualifications can be demanding, but if you fit the bill, you may be able to minimize or eliminate your federal student loans in bankruptcy. The undue hardship standard, when met, can be a real life-saver for anybody truly struggling under the burden of federal student loans.

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Federal Student Loan Eligibility in Bankruptcy

Federal student loan organizations may not take a bankruptcy filing into account for a large variety of aid options.

It's worth noting that though your bankruptcy status may not directly affect your eligibility to qualify for further federal student loans, you must be up to date on any student loans you already have. Be aware that if you have federal student loans in default, you may not be eligible for further student loans until the original loans are in good standing.

Figuring out what bankruptcy may mean for your student loans can give you some peace of mind. To better understand your possible outcomes, though, you may wish to speak to somebody who understands the legal standards at play. Complete the following form, and you can get in touch with a nearby bankruptcy lawyer to better understand your options.

The above summary of federal student loans in bankruptcy is for informational purposes only and is not legal advice. For legal advice on your particular situation, speak with a local bankruptcy attorney.

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