Can you file bankruptcy on a student loan? The answer is – most of the time – no. Sometimes, infrequently, the answer is yes.
When you file bankruptcy, you have to list all your debts, including your student loan. However, most of the time the student loan will survive the discharge, meaning that you will have to pay the student loan even though you discharged all your other debts. Congress has made it clear that the loans are going to be repaid in almost all cases.
But, on the bright side, if you have discharged most or all of your other debt, it may make it possible to pay the student loan debt without difficulty. I have developed several strategies to help folks achieve a total financial recover, including freedom from student loan debt, using bankruptcy as part of a more comprehensive strategy.
It is possible to file bankruptcy and discharge a student loan.
If you can show that you cannot maintain, based upon your current income and expenses, even a minimal standard of living if you are forced to repay the student loan; and, in addition, if you can demonstrate additional circumstances that exist to show that you will likely not be able to pay the student loan off during its normal repayment; and further that you have made good-faith efforts to repay the student loan, then possibly, you could have a shot at discharge in your student loan in a bankruptcy. (How’s that for a long legal run-on sentence? I took it from a court opinion)
As you can imagine, this does not happen to work very frequently.
If you look for information on filing bankruptcy on student loans on the Internet, you might conclude that all you have to do is fill out a form (called an adversary complaint) and you will be able to discharge your student loan in bankruptcy. In fact, I have had lots of people come to me and ask if I will file bankruptcy for them to discharge their student loans, because, after all, all I have to do is fill out some forms, right?
Not hardly. I typically tell people who want to discharge student loans in bankruptcy is that the test is so hard that if you can walk into court to make the argument that you can demonstrate all the things I outlined above to the judge, you have lost. Why? Because you were able to walk into the courtroom to make the argument!
Actually, this is not far from the truth. It is so difficult to discharge student loans in bankruptcy that it is seldom worth the effort, in my experience. And I’ve had a lot of experience in this area over the last 30 years.
Once upon a time I had a lady come to me who I thought would be a good candidate for discharge student loans in bankruptcy. She did not walk into my office. She wheeled herself into my office in a wheelchair. Attached to the wheelchair was a big green tank of oxygen, and a tube ran from the top of the tank to her nostrils because she was dependent on the oxygen 24/7. This, I thought might have a chance at being discharged in bankruptcy.
However, I will never find out if I could’ve discharged her student loans in bankruptcy because the student loan creditor voluntarily forgave the debt.
If you are looking to discharge student loans in bankruptcy, you may be looking for the answer in the wrong place. Rather than try to use bankruptcy to discharge student loan, which seldom works, it is better in most cases to look for student loan repayment options. There are many. As a certified student loan counselor, I can help you find alternatives to manage student loan debt, and in some cases some of it can be forgiven, but not in a bankruptcy.