You may have heard that you can’t file bankruptcy for student loans. That’s not entirely true. It’s possible to discharge private and federal student loans in bankruptcy — but the process is more burdensome than wiping out credit card debt, medical bills, and other types of debt
Federal student loans are less likely to be discharged in bankruptcy because they offer flexible, income-based repayment plans, deferments, forbearances, and loan forgiveness. Those things make it challenging for student loan borrowers to prove they have an undue hardship — something that must be proven before any judge will even consider discharging a student loan debt of any kind.
But private student loan lenders don’t offer the same types of benefits as the Department of Education. Although it’s still going to be a hard sell to the judge, it’s easier to file bankruptcy on private student loans and get a discharge. Plus, there’s new bankruptcy law from cases and proposed legislation that may eventually allow borrowers to get rid of their private loans without having to jump through extra hoops.
Ahead, learn more about private student loan bankruptcy.
Struggling under the weight of your private loans? Settlement or student loan refinancing may be an option, depending on your finances. If you’d like help figuring out your options, schedule a call to speak with a student loan lawyer.