Can You Go Bankrupt on Student Loans?
Student loans have become a significant concern for many individuals in recent years. With the rising cost of education, an increasing number of students are taking out loans to finance their college expenses. However, one of the most pressing questions that many borrowers have is whether they can go bankrupt on student loans. In this article, we will explore the ins and outs of bankruptcy and student loans, providing you with the necessary information to make an informed decision.
Understanding Bankruptcy
Bankruptcy is a legal process that allows individuals to eliminate or restructure their debts when they are unable to pay them. There are two main types of bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy involves liquidating the debtor’s assets to pay off creditors, while Chapter 13 bankruptcy allows the debtor to keep their assets and pay off their debts over a period of three to five years.
Student Loans and Bankruptcy
Historically, student loans were considered “non-dischargeable” in bankruptcy, meaning that borrowers could not eliminate their student loan debt through this process. However, in 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) made it more challenging to discharge student loans in bankruptcy. Despite this, there are still certain circumstances under which student loans can be discharged.
Circumstances for Discharging Student Loans
1. Undue Hardship: Borrowers can seek to discharge their student loans by proving that paying them would cause an undue hardship. This is a highly subjective standard, and courts typically consider factors such as the borrower’s income, expenses, and the duration of the hardship.
2. Total and Permanent Disability (TPD): Borrowers who are deemed totally and permanently disabled may have their student loans discharged. This discharge is permanent and cannot be reinstated, even if the borrower’s condition improves.
3. Death: In the event of a borrower’s death, their student loans are typically discharged. However, this may vary depending on the type of loan and the lender.
Legal Assistance
Navigating the bankruptcy process can be complex, especially when it comes to student loans. It is essential to seek legal assistance from a bankruptcy attorney who can help you understand your options and guide you through the process. An attorney can also help you gather the necessary documentation and argue your case before the court.
Conclusion
While it is challenging to go bankrupt on student loans, it is not impossible. Understanding the circumstances under which student loans can be discharged and seeking legal assistance can help you make an informed decision. If you find yourself in a situation where you are unable to pay your student loans, it is crucial to explore all available options and consult with a professional to determine the best course of action.
