Student Loans and Bankruptcy: Understanding Dischargeability

Though it may be possible to have student loans discharged by filing bankruptcy, achieving this is not a simple process and has strict requirements. In this blog post, we will dive into the details of discharging student loans through bankruptcy and outside of bankruptcy.

Overall, by reading this blog post, you’ll gain valuable insights into navigating the complex world of discharging student loans through bankruptcy filings while keeping up-to-date with current laws and regulations regarding these types of debts.

Understanding Student Loan Dischargeability in Bankruptcy

Bankruptcy is a judicial procedure that permits people to dissolve their debt. Depending on the bankruptcy, it may be possible to discharge all or some student loan debt. Chapter 7 and 13 are the two most common types of consumer bankruptcies.

In New York, we can only discharge student loan debt in bankruptcy if it meets certain criteria under what we know as the “Brunner test”. This test requires that an individual show they have made a good faith effort to repay their loans, they cannot maintain a minimal standard of living while repaying them, and there is no likelihood of repayment. If the prerequisites are satisfied, a court might discharge some or all of the student loan debt.

Ultimately, my office can help you explore the various options available depending on where you live. Contact us if you require any additional support while navigating these uncertain times. We are here to ensure your rights stay safeguarded throughout the entire process.

Fully grasping the subtleties of bankruptcy dischargeability for student loans is essential, particularly for those facing financial hardship. The Biden administration has made changes that could affect how and when these loans are discharged; exploring those changes should be the next step in determining what course of action may best suit your needs.

Exploring the Biden Administration Changes to Student Loan Dischargeability

The Biden Administration recently announced changes to student loan dischargeability that can provide up to $20,000 in relief for borrowers. Though these changes have been put on hold because of legal issues, they still signify a substantial step towards helping people deal with Federal Student loans.

Pell grant recipients can be forgiven up to $20,000 of their outstanding federal student loans. Other borrowers may receive up to $10,000 in debt forgiveness, depending on their circumstances.

The Biden Administration’s proposed changes to student loan dischargeability offer borrowers more options for relief, however, there are other avenues available that don’t involve bankruptcy. Moving on, we will explore the possibility of discharging student loans without filing for bankruptcy.

Student Loan Discharge Without Bankruptcy

People with Federal student loans can seek to expunge their student loans without resorting to bankruptcy in some situations. The Closed School Discharge allows borrowers whose school closed while they were enrolled or within 120 days of their withdrawal to discharge the loans taken out for that school. A Permanent Disability Discharge can be granted if the borrower has a disability that prevents them from working and they have medical evidence to support this.

If you were to withdraw from school before completing 60% of the semester but didn’t receive a refund for tuition payments made, you may be eligible for an Unpaid Refund Discharge. If someone forged your signature on loan documents or promissory notes, then a Forgery Discharge could be obtained. Likewise, Borrower Defense To Repayment Discharges are granted when individuals have been deceived by their college or university concerning federal student loans.

Student loan discharge without bankruptcy can be a difficult process, but it is possible. The Brunner test and bankruptcy may provide an alternative solution for those who cannot meet the criteria of student loan discharge without filing for bankruptcy.

Brunner test and bankruptcy

The Biden Administration and some judges are challenging the Brunner test, which is used to determine if a person can get their student loans discharged in bankruptcy. This could make it easier for borrowers to discharge private and federal student loan debt. The Brunner test has three main prongs that must be met in order for a borrower to receive a discharge of their loans.

The Biden Administration and courts are actively challenging the Brunner test, which is used to decide if a borrower can discharge their student loan debt in bankruptcy. This might make it simpler for borrowers to get rid of private and federal student loan debt. The Brunner test requires three key components that must be satisfied for a borrower to receive a discharge of their loans.

First, we must show that even after taking care of essential costs like housing fees, utilities bills, insurance premiums etc., the applicant cannot maintain a reasonable standard of living.

Next, the petitioner must show that their financial situation will remain unchanged over the time that the loan is repayment is required.

Finally, borrowers must show a sincere attempt at settling their debts by providing evidence of consistent payments made on time. This could include copies of cancelled checks and bank statements showing regular payment history over several months prior to filing for relief from creditors’ demands through bankruptcy proceedings in court. Judges have recently challenged this third prong. There are appeals pending, but hopefully we will have a resolution soon.

In filing for bankruptcy, the Brunner test matters in determining eligibility. My office can offer aid and direction to make sure you understand your rights and obligations in bankruptcy law. What my office can do is to provide guidance and help so that you understand all your rights and responsibilities under bankruptcy law.

What my office can do

My office specializes in helping clients discharge their student loans through bankruptcy. We understand it can be a difficult and stressful process, so we strive to make the experience easy and painless. Our team of legal experts will work with you to ensure that your rights are upheld and we achieve the best possible outcome.

We can also help our clients qualify for an income-based repayment program (IBR). This type of program allows borrowers to pay back their student loan debt over time based on their current income level. 

In addition, my office offers help with settling student loans outside of bankruptcy. Sometimes, a borrower may negotiate a partial debt settlement with their lender by providing them with a lump sum payment or agreeing on a lower amount of debt. After our clients receive a chapter 7 discharge, we have a system in place that is inexpensive and can help most clients settle or discharge student loans. The fees for this service are usually refundable if there is no successful outcome. Most clients will pay a few hundred dollars a month under this program.

Finally, we are familiar with the Brunner test, which is used by courts when deciding whether someone qualifies for discharging their student loan debts in bankruptcy court proceedings. The test looks at factors such as undue hardship caused by repaying the debt, good faith efforts made towards repayment prior to filing bankruptcy, and other criteria established by case law precedent set forth in various court decisions. 

Conclusion

The bottom line is that student loans and bankruptcy can be a complex situation. Depending on your individual circumstances, you may have options to discharge or restructure these debts outside of bankruptcy. If you’re considering filing for bankruptcy because of student loan debt, contact my office now so we can evaluate your circumstances and determine the best course of action.

Take control of your student loan debt and explore the options available to you through bankruptcy. Contact the Law Office of William Waldner today for a free consultation on how we can help you get back on track financially.