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by Answerbag Staff on December 15th, 2009

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Can you include student loans in a bankruptcy?

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  • by Genevieve Rice on December 15th, 2009

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    Professionally Researched. (What's this?)

    For some consumers, bankruptcy can provide the ultimate fresh start by forgiving overwhelming debts. But if you think bankruptcy will wipe out your student loans, think again. In most bankruptcy cases, student loans can only be discharged if the borrower can prove that he is physically unable to work. If that's not the case, instead, consider alternate repayment plans that better fit your financial situation.

    Graduated Repayment

    Under a graduated repayment plan, payments start out low and increase every two years over the repayment plan.

    Income-Based Repayment

    If you have Stafford, Grad PLUS or federal consolidation loans, you may qualify for an income-based repayment (IBR) plan. With IBR, you may cap your monthly payment at 15 percent of your discretionary income and, after 25 years, any unpaid portion of your student loan debt will be forgiven.

    Income-Sensitive Repayment

    To lower your monthly student loan payment, you may enroll in an income-sensitive repayment plan that allows you to pick an affordable monthly payment between 4 percent and 25 percent of your monthly gross income. However, with this repayment method, interest may be higher.

    Extended Repayment

    Reduce monthly loans payments by extending the repayment period of your student loans to as long as 25 years. However, you must owe at least $30,000 in debt to qualify for this type of repayment.

    Deferment and Forbearance

    In times of economic hardship, you can postpone making payments for up to one year under deferment or forbearance. In some cases, you can even stop interest from accumulating during your deferment period.

    Filing Bankruptcy

    To discharge student loans in Chapter 7 bankruptcy, you must file a separate motion in addition to bankruptcy and appear before a judge to demonstrate why your disability would prevent you from obtaining gainful employment.

    Source:

    SallieMae.com: Bankruptcy and Student Loans

    Lawyers.com: Student Loans in Bankruptcy

    FinAid.org: Repayment Plans

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  • by bankruptcyattorney on November 21st, 2010

    bankruptcyattorney

    For the most part student loans are considered non-dischargeable in bankruptcy. Only if you meet the standard of undue burden will your student loans be discharged as part of your bankruptcy case. This standard is very difficult to meet and it is rarely met. In order to meet this standard you must show that:

    1. Based on current income and expenses, the debtor cannot maintain a "minimal" standard of living for herself and her dependents if forced to repay the student loan debts.

    2. There are additional circumstances that indicate this state of affairs is likely to persist for a significant portion of the student loan repayment period.

    3. The debtor has made good faith efforts to repay the loans.

    Most people fail to meet the above required undue burden standard. It is generally only people who are older, disabled that may end up meeting the above requirements.

    Source:

    http://www.socaladvocates.com/student-loans-and-bankruptcy

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