Looking for a bankruptcy lawyer to try and discharge your student loan debt as an undue hardship? Good luck. Many bankruptcy attorneys will tell you that discharging student loans is something that can't be done. It's just too hard.
But here's the thing. Hard doesn't mean impossible. It just means hard.
Also, sometimes filing an adversary proceeding to discharge student loan debt isn't about getting an actual discharge.
Sometimes it makes sense to file a case to leverage a great settlement.
In many of the adversary proceedings I've filed, that's exactly what happens.
The lender agrees to forgive some of your loan debt and you get a fixed, low monthly payment at a low interest rate.
Can bankruptcy help with student loans?
Bankruptcy can help with both federal student loans and private student loans. For instance, if you have high student loan payments on your private loans, a chapter 13 bankruptcy can give you a lower payment for the next 3 to 5 years. Or if you’re facing a student loan wage garnishment, a bankruptcy filing will stop that from happening.
By itself, however, your bankruptcy case won’t discharge your student loans. Congress wrote the law so that you have to take an additional step in the bankruptcy process to get rid of your student loans. You’ll need to file an adversary proceeding.
What is an adversary proceeding? Basically, it’s a court case within a court case.
The main case is the bankruptcy you filed.
The case within that case is the adversary proceeding.
The adversary proceeding is simply a lawsuit.
In that lawsuit, you'll ask your bankruptcy judge to discharge your student loan debt because it’s causing you and your dependents an undue hardship.
Typically, your bankruptcy lawyer will tell you that they can't help you with your student loans. If that happens, you may need to get legal advice from a student loan lawyer -- someone who deals with student loans every day in their law firm.
You can talk with me. I'm a student loan bankruptcy lawyer.
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What happens to student loan debt in bankruptcy
For the most part, whether you file a chapter 7 bankruptcy or chapter 13 bankruptcy, pretty much the same thing happens to your student loan debt:
- your student loan payments are suspended
- your loans are placed in a bankruptcy deferment/forbearance and
- any wage garnishment for student loans and other debt stops
At the end of your bankruptcy proceedings, you'll get rid of dischargeable debt (think unsecured debt like credit card debt, medical bills, etc.).
Your student loan debt will remain, however.
To get rid of that debt, you'll need to file an adversary proceeding.
More on that later.
If you file a chapter 13 bankruptcy, one other thing happens.
In a chapter 13, you can make loan payments on your student loan debt as part of your chapter 13 repayment plan.
Few people actually make these loan payments.
Usually, they're unable to make the payments because they don't have enough money left over after paying their secured debt.
Note, if you're a public service employee in a chapter 13, by not making payments, you may end up losing 3 to 5 years of credit toward loan forgiveness. Speak with your bankruptcy attorney for your options.
Why is it difficult to discharge student loans in bankruptcy?
It's difficult to get a bankruptcy discharge of student loan debt because of changes made to the Bankruptcy Code.
Before 1980, student loan debt was dischargeable without having to prove undue hardship.
Your financial situation didn't matter.
Congress started to change the rules as the Department of Education began lending more and more student loans to borrowers.
Politicians decided it should be harder to discharge student loans in bankruptcy.
So in the late 1970's, they changed the Bankruptcy Code to require you prove undue hardship to discharge a student loan.
In making that change, they decided against defining undue hardship.
Over the years, the lack of definition and the subsequent changes to bankruptcy laws, left the undue hardship discharge decision in the hands of the bankruptcy court.
Student loan borrowers have been suffering ever since.
How to discharge student loan debt in bankruptcy?
To get a student loan discharge in bankruptcy you have to do two things:
- File a bankruptcy case and
- File an adversary (lawsuit) to discharge your student debt
You have to file the bankruptcy case first. You can file the adversary before your case ends. You can also file it after your case ends.
How long after depends on the bankruptcy court where you filed your case. I've been able to open a case that had been closed for 10 years.
I've also seen judges refuse to grant a motion to reopen a bankruptcy case that closed 3 years earlier. You'd want to check with your bankruptcy lawyer to find out your options.
When you file the adversary, you'll likely have to deal with the totality of the circumstances test or the Brunner Test.
(The Brunner Test comes from a 1980's bankruptcy case: Brunner v New York State Higher Education.)
The judge in your case will use one of these tests as the undue hardship standard you have to pass to get a discharge.
No matter which test is used, the judge is trying to answer the same question:
Can you maintain a minimal standard of living while repaying your student loans?
How to find a student loan bankruptcy lawyer
First, let me be clear, you don’t need to hire a student loan attorney or bankruptcy lawyer to get an undue hardship discharge.
But hiring the right lawyer will give you a better chance at getting a student loan bankruptcy discharge.
Admittedly, finding the right lawyer is going to be challenging. The reality is that most bankruptcy lawyers you talk to will tell you it’s impossible (or at least really hard) to discharge student loans in bankruptcy.
So how do you find help?
Well, you’re here, so you can talk to me.
I’m a student loan bankruptcy lawyer.
I have extensive experience filing bankruptcy cases to try and get a full or partial discharge of student loan debt.
Have I been successful? Absolutely.
I’ve successfully argued to bankruptcy judges in unique situations that they should eliminate my clients huge outstanding student loan balances.
I’ve also used the bankruptcy process to leverage settlements on more favorable terms.
Let’s talk to see what we can do about your student loan balances.
Click here to schedule a free consultation.