What can I do about my student loans?

29 Jan What can I do about my student loans?

Student loans are becoming more and more troublesome. People essentially mortgage their lives when they take out student loans. Student loans are not dischargeable in bankruptcy. Let’s say that again. Unless you can prove substantial hardship under the very difficult Brunner test, you won’t be able to discharge your student loans in bankruptcy.

Let’s go over the Brunner test. To prove the substantial hardship you need to file a suit against the lender who made your student loan. In that suit, you’ll have to prove:

  • If forced to repay the loans, the debtor could not maintain a minimal standard of living for himself and his dependents
  • Circumstances show that this state of affairs is likely to continue for a very long time
  • Debtor has made good faith efforts to repay the loans

This is a very difficult standard. You may have a better chance to deal with your student loans in chapter 13. There you have the opportunity to include your student loans within your plan. You might be able to concentrate on paying the student loans under your chapter 13 plans while paying relatively little on your other debt.

Outside of bankruptcy, another option which now is available is called Income Based Repayment plan. This is a program offered by the Department of Education and is only for government student loans. Information about this is available here.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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