Student Loans

Student Loans

Student loans can be very difficult to discharge and usually reserved for people who could not maintain even a minimal standard of living for themselves or their dependents if they were forced to repay the student loans.

The two different kinds of bankruptcy handle this quite differently.

Student Loans After Bankruptcy

Chapter 7

In a chapter 7 bankruptcy most courts refer to what is known as the Bruner Test to determine if the student loan is eligible to be discharged in the bankruptcy.  The Bruner test can be paraphrased and summarized as follows.

  • Based upon your current income and expenses, you cannot maintain a minimal standard of living for yourself and your dependents if you are forced to repay your loans.
  • Your current financial situation is likely to continue for a big part of the repayment period.
  • You have made a good faith effort to repay your student loans.

As a general rule, bankruptcy courts are often reluctant to discharge student loan obligations, and as a result the standard of proof needed to show the financial hardship repay the student loans might cause you and your dependents can be high.

Only an experienced bankruptcy lawyer can determine your ability to obtain a discharge of your student loans in bankruptcy.  Even if you are not able to discharge her student loans in a chapter 7 bankruptcy you may be able to obtain relief on your direct student loans through the Department of Education or under chapter 13 bankruptcy.  At  Marshall D Cohen LLC we have experience counseling our clients about the likelihood of their success in discharging their student loans, repaying student loans under chapter 13, and seeking administrative relief through the Department of Education.

Chapter 13

Even if you’re not eligible to discharge her student loans under chapter 7 you still may obtain partial relief from your student loans, both direct and private student loans, through chapter 13.  Under chapter 13 you propose to the court repayment plan to repay all of your debt including your student loans.  Often times the repayment of debt can be at pennies on the dollar.

The typical chapter 13 plan last 3 to 5 years.  At the end of your chapter 13 plan all of your debts are discharged with the exception of your student loans.  At the end of the chapter 13 plan without having any other debt clients are in a better position to reestablish a repayment plan on their student loan whether it be done by simply picking up the payments, consolidating their student loan debt, entering into an income-based repayment plan, or applying for a loan rehabilitation program.