Bankruptcy and Student Loan Discharge
It is common wisdom that among the few things you cannot have forgiven when filing for bankruptcy is student loans, and considering that it is typically the biggest expense next to a mortgage in US households, that’s just too bad. However, there are always exceptions to the rule so never say never.
In some instances (admittedly rare) a bankruptcy court will consider forgiving a student loan under certain circumstances, primarily when paying the student loan results in undue hardship. However, it is not enough that the debtor declares that it is; the state bankruptcy court will determine it based on the results of a test, which differs from state to state. In order for an applicant to request a discharge of a student loan, a formal Complaint to Determine Dischargeability must be submitted together with your bankruptcy documents.
The court will then determine if a student loan discharge is warranted. Many states including Alabama use what is known as the Brunner test, which considers three criteria: poverty, persistence, and good faith. Others use what is known as the Totality of the Circumstances test to determine undue hardship.
As a general rule of thumb, however, it is extremely difficult to convince the court to allow even a partial discharge of student loans. These are highly complex undertaking and would require significant assistance from experienced bankruptcy attorneys to even have a remote chance of success.
If paying for your student loan poses undue hardship for you, you have no choice but to try to get it discharged when filing for bankruptcy. Consult with a bankruptcy lawyer in your area for a frank assessment of your prospects in this matter.