What Student Loans Can Be Discharged In Bankruptcy

What Student Loans Can Be Discharged In Bankruptcy – In today’s digital age, the old adage “Don’t believe everything you read” is truer than ever, especially when it comes to complex matters like bankruptcy law. A recent article on Investopedia, a trusted platform for financial advice, presents misleading and outdated information about student loan discharges in bankruptcy. This surveillance can have serious consequences for those who want to be free of student debt.

Dismissing student loans through bankruptcy has historically been seen as an insurmountable challenge. The oft-cited Brunner test makes it difficult for borrowers to get relief from their student loans.

What Student Loans Can Be Discharged In Bankruptcy

Showing that repaying student loans would cause undue hardship and thus make it impossible to maintain a low standard of living.

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Provide evidence that the conditions causing these difficulties may continue for a significant portion of the loan repayment period.

This strict framework often leads to negative outcomes for many borrowers, leading to the widespread belief that it is nearly impossible to repay student loans once they are in default.

Fast forward to November 2022 and the landscape has changed dramatically. The Department of Justice and Education introduced flexible guidelines that usher in a new era for borrowers and bankruptcy professionals.

This simplified process, along with broader eligibility criteria, offers a lifeline to borrowers who were previously rejected under the strict parameters of the Brunner test.

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Since the introduction of these new guidelines, it has been at the forefront of this change, successfully filing many bankruptcy cases aimed at paying off student loan debt. We are proud to announce a high level of success, which marks a departure from the previous story.

It is important to understand the weight of this change and its consequences. If your bankruptcy attorney is still following up on old issues, or worse, doesn’t know the federal guidelines for 2022, that’s a red flag. Your path to financial freedom is sacred and your legal representative should be equipped with the latest knowledge and skills. If they don’t, it’s time for a change.

The result is that the field of discharging student loans through bankruptcy has greatly expanded, rendering the ideas of the past obsolete. With the 2022 federal guidelines offering a new ray of hope, it’s important to work with advocates who are on board with this revolutionary change. As always, the right guidance can mean the difference between ongoing financial struggles and long-awaited relief from heavy student loan debt. It is possible to include student loan debt in your bankruptcy file and have it approved by the court if you can prove that it is an unacceptable hardship. Although most student loans can be automatically discharged in bankruptcy, hiring a qualified Honolulu bankruptcy attorney can increase your chances of getting your student loan discharge.

Most student loans are not automatically released from collection, but it is not impossible to get student loan forgiveness. Most student loans are not automatically released from collection, but it is not impossible to get student loan forgiveness.

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Consider, for example, that about 0.1% of students default on their loans through bankruptcy. These numbers are mainly due to students receiving their loans because repayment would cause “undue hardship” for them and their families. Another factor is that some private student loans, which are unsecured consumer loans rather than student loans, can be discharged.

Our bankruptcy attorney, Blake Goodman, can provide us with more detailed information about student loan balances and their potential discharge during bankruptcy. If you find yourself overwhelmed with questions, please contact our team at Blake Goodman, PC for expert advice.

For those living in Hawaii and considering this route, an experienced Honolulu bankruptcy attorney is key to navigating the complexities of student loan bankruptcy. The rules have changed over the years. For example, student loans used to qualify after seven years of repayment, but that changed in 1998.

Today, the primary way to discharge student loans in bankruptcy is to claim that repaying the loan creates an “undue hardship.” To succeed in this claim, it is necessary to proceed with the opposite. A bankruptcy attorney can guide you through the process, which is less intimidating.

The Chapter 7 Discharge

To protect the long-term health of the student loan program, Congress exempted most student loans from bankruptcy discharge. But even with this in mind, with the help of a skilled bankruptcy attorney, borrowers can argue that continuing their student loan would cause “undue hardship.”

Proving undue hardship is a challenging task, but not impossible, especially with the help of a dedicated Honolulu bankruptcy attorney. To prove undue hardship, you must show that your financial situation prevents you from maintaining a low standard of living if you are forced to repay the loan. In addition, your financial situation must last most of the repayment period and you must have made a good effort to repay the loan.

Some courts have held that private student loans cannot be considered an “obligation to repay funds received as educational benefits” under section 523(a)(8)(A)(ii) ) in bankruptcy cases.

Accordingly, private student loans that are not used to pay travel expenses, such as tuition, books, room and board, are not considered student debt.

Student Loans In Bankruptcy

This situation may arise if the loan is paid directly to the borrower or is used for expenses related to preparing for the bar exam or going to the doctor’s or dentist’s office.

As a result, private student loans can be discharged because they are considered more common unsecured debt than student loans.

If the judge determines that you face undue hardship or accepts the Department of Justice’s recommendation to pay your debt, the judge may take the following steps:

The judge’s decision on what to do with undue hardship depends on the type of bankruptcy you file, whether Chapter 7 or Chapter 13.

Private Student Loans Can Now Be Discharged In Bankruptcy, But Consider The Alternatives First

In Chapter 7 bankruptcy, you ask the judge to write off all of your debts, but you must have an income below certain limits to qualify. In Chapter 13 bankruptcy, you can always seek the help of a judge to restructure and reduce your debts.

There is no income requirement for Chapter 13 bankruptcy, but you must follow a payment plan set by the bankruptcy court for 3 to 5 years before the remaining debt can be discharged.

Chapter 7 bankruptcy is often called “liquidation bankruptcy.” This allows borrowers to write off most of their unsecured loans. However, paying off student loans under Chapter 7 requires a showing of undue hardship.

Unlike Chapter 7, Chapter 13 bankruptcy includes a payment plan. The debtor will repay the creditor within three to five years. Although the total amount of student loans cannot be written off, the payments can be managed.

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If the judge does not decide that you face an undue hardship, you have the right to appeal the decision. Additionally, you can explore other ways to manage your student loan debt, such as temporarily suspending payments through deferment or forbearance, reducing payments by enrolling in a debt-driven repayment plan income (IDR), or negotiate a repayment agreement with your lender.

If your bankruptcy case was approved but you did not ask the court for an undue hardship assessment before the case was closed, you can file a petition to reopen the bankruptcy case. By refilling the case, you can start moving forward with your student loan forgiveness.

Regarding bankruptcy, adversary proceedings play an important role in determining student loan bankruptcy. This is a bankruptcy case where the debtor is contesting the default status of the student loan.

Initiating a lawsuit against an opponent is not a decision taken lightly; This requires preparation and a solid understanding of your financial situation. You must provide compelling evidence to demonstrate undue hardship, which often involves complex litigation.

Can Student Loans Be Discharged Through Bankruptcy?

At Blake Goodman, P.C., Attorneys at Law, our primary goal is to guide Hawaiians through financial hardship. Our compassionate team of Honolulu bankruptcy attorneys can help you explore all of your options for student loan discharge in bankruptcy.

Our expertise includes Chapter 7 or 13 consumer bankruptcy, debt negotiation, and bankruptcy solutions. Contact us today to schedule your free consultation today at our offices in Honolulu, Kaneohe, Aiea or Maui.

Blake Goodman received his law degree from George Washington University in Washington, D.C. in 1989 and has practiced bankruptcy law in Texas, New Mexico and Hawaii since then. Previously, Attorney Goodman also practiced as a CPA and received his license in the State of Maryland in 1988. As October approaches, millions of Americans prepare to start paying off their student loans again. This upcoming deadline is set against a backdrop of growing financial problems. A recent Morgan Stanley survey found that an alarming 34% of respondents said they could not pay back their student loans.

The situation is also complicated by the uncertainty surrounding Biden’s plan to forgive up to $20,000 in student loans. The proposal is currently being challenged and is awaiting a Supreme Court decision which is expected to be published this week.

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While these may be turbulent times for borrowers, there is an important silver lining in November

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