Student Loans may sometimes be Discharged in Bankruptcy. Generally, in order for a Debtor to Discharge a Student Loan, he or she must establish that the Student Loan creates an undue hardship. Most bankruptcy courts will adopt a three-part test in determining whether a Student Loan creates an undue hardship to the Debtor. The courts will generally determine the likelihood that the Debtor can repay the Student Loan, what efforts the Debtor took to repay the Student Loan, and the present financial circumstances of the Debtor.
Other factors that may have an influence on whether the Student Loan may be Discharged in Bankruptcy, include whether the Debtor received an educational benefit from the provision of the Student Loan, and the accreditation or lack of accreditation of the institution at which the Debtor was matriculated.
A Debtor who has been determined to be disabled is more likely to receive a Discharge of such loan in Bankruptcy. Traditionally, a Debtor who has been determined disabled by an Administrative Court servicing Social Security Disability claims, can seek a Discharge through the Social Security Administration. This is sometimes referred to as Social Security Discharge.
However, whether a Student Loan may be Discharged in Bankruptcy is determined on a case by case and factual basis. In order to seek a Discharge of a Student Loan in Bankruptcy, the Debtor must generally bring an Adversary Proceeding whereby the Debtor actively seeks the Discharge of such Debt.
If you are interested in whether a Student Loan may be Discharged in Bankruptcy, or other means to handle Student Loan Debt, please contact our office. We have numerous solutions that may be beneficial in dealing with not only Student Loan Debt, but other Debt obligations.