If you are struggling with mounting student loans, you are not alone. The American Student Assistance organization claims that over $1 trillion is owed in student loan debt. In fact, student loans have surpassed credit card debt nationwide.
When faced with increasing student loan debts, many people opt to file for bankruptcy in the hope of avoiding payment on the loans and moving on with their lives. However, this may not be the best course of action for many reasons.
- Your student loan may not be discharged even if you file for bankruptcy
Some student loans can be discharged by filing for bankruptcy while others can’t. Student loans are not secured debts. Many student loans are not dischargeable by bankruptcy. If you have loans that cannot be discharged in bankruptcy, filing bankruptcy would only be wasting your time and resources.
- You may not meet the criteria
There are certain conditions that must be met in order for your student loans to be discharged when you file for bankruptcy. The determination of whether you meet the criteria will rest with the judge. It is always wise to consult with an experienced consumer bankruptcy attorney before filing for bankruptcy.
- The interest still continues to accrue
You may think that you’re safe while in the process of filing for bankruptcy, but this isn’t true. You may be protected from having to repay the loan while your case is still ongoing, but that doesn’t stop the interest on the loan from accruing if the debt is not discharged. You should therefore make an effort to pay what you can in order to reduce the amount of money you will owe by the time your bankruptcy case comes to a close. Again, the key is to review all of this with your attorney before filing your case.
Discharging your student loans
While filing for bankruptcy isn’t always the best answer for discharging your student loans, it is possible to do so in certain cases. If this is an option you want to take, be sure to hire an experienced attorney to guide you through the entire process.
The first step to discharging the student loans would be filing a motion with the court that states you meet the criteria to have your student loans discharged under bankruptcy. You will have to prove that repaying the student loan will be an undue hardship for you and your family.
You must provide evidence that:
- You will not be able to maintain the minimal standard of living with your current expenses and income if you were required to repay the loan.
- Your current financial state will continue for the foreseeable future. This period includes a significant portion of the period for the loan repayment.
- You have made efforts in good faith to repay your loans.