There are few common questions individuals and families ask regarding the discharge of student loans through bankruptcy:
- Can I file bankruptcy on my student loans?
- Are private student loans dischargeable?
- Are federal student loans dischargeable?
The answer to each of these questions is yes, but only under certain conditions. Read on to learn the conditions needed for you to be able to discharge your student loans through bankruptcy.
Dischargeable Student Loans
While it is true that student loans are not automatically dischargeable through bankruptcy, exceptions exist that can allow the discharge of private and federal student loans through bankruptcy. Federal bankruptcy law has a very specific definition of what a student loan is. If your loan does not meet this specific definition exactly, it may be eligible for discharge through bankruptcy. The Internal Revenue Code Section 221(d)(1), defines a qualified education loan as “… any indebtedness incurred by the taxpayer solely to pay qualified educational expenses.” So if your student loan exceeds the amount that your school has determined it costs to attendance, and you used the rest for other things, you can argue that the loan was not a student loan by definition and thus dischargeable. The same section of the I.R.C. goes on to state that in order to be considered a qualified education loan, the loan must have been taken out to pay for educational expenses incurred while the recipient was an eligible student. So, if the loan was used to pay for expenses incurred in any period when you were not an eligible student, you can argue that it was not a student loan. Consult an experienced bankruptcy lawyer to discuss options for discharging your student loans through bankruptcy.
The Undue Hardship Test
Even if your loan meets the definition of a student loan, and thus is not dischargeable by the aforementioned means, it may still qualify for discharge if you meet the Undue Hardship Test. To put it simply, this test says that if repaying your student loan will cause you or your family undue hardship, it may be discharged under these three conditions:
- If forced to repay your student loans, you and your family cannot maintain a minimal standard of living.
- There are indications that your state of affairs will likely persist for a significant portion of the repayment period.
- You have made a good faith effort to repay your student loans.
If these three conditions can be met, you may be able to discharge both your private and federal student loans. It is the discretion of the court to determine that these conditions have been met and to grant a discharge of the loans. A consultation with a skilled bankruptcy lawyer can help you with the uncertain process of pursuing a discharge of your student loans through bankruptcy.
Documents Needed For The Discharge of Your Student Loans
Although difficult, discharging your students loans through bankruptcy is not impossible if you can present your case for discharge effectively. To do so, you will need to gather at least the following documents:
- A letter from the school or schools stating your cost of attendance.
- Approval/denial letters.
- Proof that the loan was disbursed.
- Recent student loan statements.
Once you have gathered these documents, you should take them to an experienced bankruptcy lawyer who can evaluate whether or not you will be eligible for a discharge of your private and/or federal student loans through bankruptcy.
Free Consultation: Oklahoma Bankruptcy Lawyer
Do you want to know whether you qualify for a discharge of your student loans under the Bankruptcy Act? Would you like to know the costs and procedures of an Oklahoma bankruptcy? Call (405) 563-7888 for a free consultation with a Oklahoma City bankruptcy lawyer or (888) Debt-Line for an Oklahoma bankruptcy attorney handling bankruptcies statewide. Our bankruptcy attorneys have years of experience in Oklahoma bankruptcy law and in applying Oklahoma bankruptcy exemptions, so that Debt Line Law Office clients can keep their exempt property and still discharge unsecured debts through a Chapter 7 bankruptcy in Oklahoma. With a ten (10) minute, free phone consultation with one of Debt Line’s Oklahoma City bankruptcy lawyers, you can know what you qualify for and the costs and procedures involved.