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Are Student Loans Eligible For Bankruptcy?

The number of students who graduate college with debt is too great to even mention. The amount of student loan debt is astronomical and graduates are having a hard time finding jobs that pay them enough to repay their student loans. This problem is one that does not have very many options for resolution, and even filing bankruptcy might not help. Generally speaking, student loans are not eligible to be discharged in bankruptcy.

That said, under extraordinary circumstances, you can eliminate your student loans debts by filing for bankruptcy. Here are some of the general rules about discharging student loan debts in bankruptcy, but keep in mind the decision depends on the particular facts of your case:

• Repayment of your student loans must present an undue financial hardship on you and your dependents.
• Job opportunities must be so dire that it is not likely you will obtain any type of gainful employment.
• If you are required to pay back your student loans, you will not be able to maintain even a minimal standard of living.
• You have made an effort, in good faith, to repay your student loans.
• The hardship you will face will persist for a significant portion of the time you are making repayment on your loans.

This is a difficult test to meet, especially if you are married to someone who has a job. The hardship envisioned by the first bullet point is not limited to you, but also to your dependents. So if there are other sources of income in your home, the Court may take the position that your dependents will not suffer an undue hardship. Remember that each case is different, and your facts may be such that you would be successful in asking for your student loans to be discharged. It does require you to file a separate lawsuit asking the Court to find that your student loans are no longer due, and that lawsuit is filed within your bankruptcy case. But even if you do not meet the requirements to have your student loans discharged, bankruptcy can help you get rid of other debts. For this reason, you should strongly consider filing a case if you cannot pay all of your bills on time. Our team of trained bankruptcy professionals is here to sit down with you and talk about your options.

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