Will it soon be Easier to Discharge student loan debt in Bankruptcy in New York?


Responding to baseless claims that too many students would want an easy way out of their student loans congress prohibited federal student loans from being discharged in personal bankruptcy except in cases where a severe undue hardship could be shown in 1976.  Then with the changes to the US Bankruptcy Code in 2005 private student loans were also deemed to be non-dischargeable.  This combined legislation essentially put all student loans in with the same category as child support, tax liabilities, and criminal restitution, or those debts that for all intents and purposes are non-dischargeable in bankruptcy.


It’s not impossible to discharge student loans, but it is rarely worth the effort and expense in New York City.  If you have a severe hardship an adversary proceeding could be filed that could attempt to discharge your student loan, but these are very costly and not a sure thing.  In fact your chances of successfully discharging a student loan in New York are next to none.  In one case in the SDNY a debtor had a serious and obvious medical disability that prevented him from working for over a year.  An adversary proceeding was filed to discharge his student loans, but the judge basically responded by saying “let’s wait a year and see if he gets any better.”


Nevertheless, if you are facing an overwhelming debt burden from you student loans bankruptcy can help relieve the burden if not entirely discharge the debt.   The act of filing for Chapter 7 bankruptcy is usually seen by student loan lenders as a good reason to offer a payment deferment or forbearance.  The debt will still be there, but you may have a good period of time off from paying it.  We could also potentially file a Chapter 13 bankruptcy that would put your student loan payments on hold for a period of 3-5 years without defaulting on the loan due to a provision in the Bankruptcy Code known as the “Student Loan Stop.”  A good bankruptcy attorney may also look to include your student loan payments in your chapter 13 repayment plan as interest free, or may even look to combine filing a Chapter 7 and a Chapter 13 if your debt troubles involve more than just student loans.


The various legal strategies to help you get the most out of bankruptcy in terms of you student loan debt can be very complex and may require your attorney to prepare multiple filings and attend multiple hearings.  In light of this it is very important to seek a qualified bankruptcy law firm that has experience with all types of consumer bankruptcy cases.  In other words, if finding relief from your student loans is important to you in your bankruptcy then avoid a Chapter 7 bankruptcy mill or preparation service and go instead for an attorney with a more individualized approach.


If you are underwater on your bills including your student loans please don’t hesitate to get the debt relief you deserve.  If you live in New York and need to find affordable bankruptcy help please give the Law Offices of William Waldner a call at 212-244-2882 to arrange a free bankruptcy consultation.  We will explore every possible way to find relief from all of your toxic debts including your student loans.


This article is intended for educational purposes only.  By reading this article no attorney-client relationship has been created.