When Can You Get Relief in Bankruptcy from Student Loan Debt?
Have you racked up a substantial amount of student loan debt, only to find a really tough job market when you graduated? Even if you’ve been able to find some work, chances are good that your student loan obligations take a significant portion of your disposable income, making it difficult to meet your other needs. You may have considered filing bankruptcy, just so that you can get a fresh start, only to hear that student loans cannot be discharged in bankruptcy. Don’t dismay—you may still have options.
The Discharge of Student Loan Payments in Bankruptcy
As a general principle, student loan debt cannot be permanently discharged through a Chapter 7 bankruptcy filing. There is, however, no prohibition on seeking to restructure or reorganize your debt in Chapter 13. If you choose this option, your student loan arrearages will be treated as “non-priority, unsecured debt,” much like a credit card bill. When you create a reorganization plan in Chapter 13, your student loan creditors will be on equal footing with all other unsecured creditors. It’s important to understand, though, that Chapter 13 reorganization will not wipe out your student loan debt. If there’s any balance still due at the end of the bankruptcy period, you will still be responsible for it.
The Availability of the Hardship Exception
There is an exception to the general rule banning discharge of a student loan obligation. If you can demonstrate that making the payments will cause an undue hardship on you and your family, you may be able to extinguish some or all of the debt. Typically, that requires that you show:
- You cannot maintain a minimum standard of living for you and your dependents if required to pay your student loans
- Your current financial condition is expected to last through all or most of the repayment period, and
- You have made a good faith effort to repay your loans
Contact Our Offices
At the Law Office of Andrew B. Finberg, LLC, we bring comprehensive bankruptcy counsel to individuals in Burlington, Camden and Gloucester counties in New Jersey. To schedule an appointment, call our office at 856-988-9055 (toll-free at