Closing Chapters: What Bankruptcy Law Really Says About Student Loans



Student loan forgiveness is a hot-button topic in the United States right now. President Joe Biden has been criticized for his take on this topic, while Senator Elizabeth Warren has been an advocate of allowing for student loan forgiveness. 

Contrary to popular belief, student loans can be discharged if a person files for bankruptcy, but the process is complicated. This post will examine how it works and how a bankruptcy lawyer can help facilitate the discharging of student loan debts. 

Free Bankruptcy Evaluation

Ready to get out of debt and regain your financial freedom? Click here to speak with a nearby attorney for FREE about your claim.

Myth: You can’t discharge student loans when filing for bankruptcy 

For too long, people believed that bankruptcy couldn’t discharge student loans. There’s no truth to this! In fact, the United States Bankruptcy Code can provide relief to debt-burdened consumers who need a fresh start to achieve financial fitness. Although it can be more difficult to discharge many student loans under bankruptcy than other types of unsecured debt. Additionally, it’s vital that loan owners, lenders, debt collectors, and servicers honor the discharge of debts by bankruptcy judges.

Types of loans or instances when you can discharge student loan debt

Student loans are significantly more difficult to discharge under U.S. bankruptcy law than other types of unsecured debt. And although federal student loans are dischargeable in bankruptcy, they’re more difficult to discharge than private student loans. Overall, it’s important to understand the types of student loans that can be discharged under bankruptcy law. These types include:

  • Loans whose amount exceeds the costs of attendance (tuition, rooms, attendance, books), which can occur when a loan is paid directly to the consumer
  • Loans made to cover dormitory expenses and moving costs
  • Loans to pay for educational fees at institutions not eligible for Title IV funding (i.e., foreign colleges/universities, unaccredited training programs)
  • Loans made to cover fees and living expenses incurred while studying for the bar exam or other professional exams
  • Loans made to cover fees, living expenses, and moving costs associated with medical or dental residency
  • Loans to a student attending school less than half-time

Why the process is challenging

Bankruptcy filing for student loans isn’t an easy process. It involves filing a Chapter 7 or Chapter 13 bankruptcy and then taking an additional step, which is filing an adversary proceeding (AP). This requires completing extensive paperwork and disclosure of your assets, income, debts, and expenses to determine whether your debts are dischargeable. The bankruptcy court will then assign an impartial trustee to confirm your debts with your creditors. Before court proceedings can begin, you must also undergo credit counseling.

If student debt is your only financial challenge, you’re unlikely to get rid of it through bankruptcy. Only people whose circumstances are beyond their control are eligible for a student loan discharge. To succeed, you must demonstrate that the loan would cause you undue hardship if not discharged. 

The outcome of your case will also depend on how your student loan creditors handle it—whether they agree that you’re facing undue hardship and whether it’s worth their efforts to go to court. These are big companies with attorneys representing them, which is a convincing reason to have an experienced bankruptcy lawyer representing you.         

A bankruptcy attorney can help you file the claim and discharge your loans

Student loans can be discharged in bankruptcy, but the process is difficult. It requires several steps including filing for bankruptcy, filing an adversary proceeding, and then proceeding to a trial. Given the complicated process of filing and succeeding in student loan discharge via bankruptcy, it’s wise to have a proven bankruptcy attorney work for you. Here are a few reasons to consult an attorney who specializes in bankruptcy law:

  • obtain expert advice on which bankruptcy chapter is best for you;
  • collate all the proof and documentation from creditors;
  • prove that repaying education debt causes you undue hardship;
  • improve your odds of getting a student loan discharge;
  • determine the best avenue for your financial fitness.

Our experienced board-certified attorneys at LegalASAP can help you get through this challenging process to regain financial freedom. You won’t pay anything for a no-obligation initial phone consultation to discuss your specific debt issues and legal options. 

Take our free evaluation to see if you may qualify and access our network of bankruptcy lawyers. Qualified clients can get the help they need and get on their way to a fresh new start. Contact LegalASAP today.