According to the Student Loan Marketing Association (Sallie Mae), the organization that administers the government’s insurance program for education lenders, most courts are reluctant to discharge student loans.
Your student loans may be discharged if you can prove that paying them creates an “undue hardship on you and your dependents”, but this is difficult to prove. Reasons that may qualify you for the hardship is if you have become disabled to the point that you can’t work or otherwise have no prospect of being able to earn money.
A common test used to determine if your student loan has become a hardship is the Brunner test.
1. The debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for the debtor or debtor’s dependents if forced to repay the student loans;
2. additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and
3. the debtor has made good faith efforts to repay the loans
Not all courts use this test to determine if repaying the student loans would create a hardship. Your student loan will be canceled if you can prove your case in court.
Not Automatic in Bankruptcy
Determining if the student loan is a hardship is not automatically decided in the bankruptcy process. You must file a separate petition and go to court before a judge. If your student loan is discharged and you still have overwhelming debt, it may be a good option to speak to a qualified bankruptcy attorney.
If you are unable to receive the hardship discharge, you may want to consider filing a Chapter 13 bankruptcy. Filing for bankruptcy gives you automatic protection from collection actions while the case is in process. The student loan payments can be restructured and provide you with time to catch up and make arrangements to pay back any past due amounts.
Contact a Fort Worth bankruptcy attorney today to discuss your options when it comes to student loan debt.