You’re drowning in debt, so you know that bankruptcy may be in your future — but the fact that you have huge student loans hanging over your head makes you wonder if it’s even worth it. After all, you’ve heard (more than once) that student loans can’t be discharged.
Well, that isn’t exactly true.
Much of the time, educational loans are not dischargeable through the bankruptcy process, but there are exceptions. If the court (in the form of the trustee in charge of your case) can determine that allowing the debt to remain would create an “undue hardship” on you or your family, they can still be forgiven.
There’s no hard-and-fast rule about what qualifies as an undue hardship, but you can generally expect the trustee to give weight to the following factors:
- Your ability to maintain a minimum standard of living: If your income is too low to repay the loan and still provide the basic necessities for yourself and your dependents, that’s a mark in your favor when it comes to getting those loans discharged.
- The likelihood that your financial situation will improve (or not): All kinds of personal circumstances can limit your job prospects and income. If your financial situation isn’t likely to change in the foreseeable future, that also lends weight to your request for discharge.
- Your repayment history on the loans: Essentially, the more you can show that you’ve made some good-faith efforts to repay the loans before asking for a discharge, the better.
Don’t ever assume that you know all of the ins and outs of the bankruptcy process. If your debts are overwhelming, talk to an experienced bankruptcy attorney for information that applies to your specific situation.