28 Jun If I Live In California, Can I Discharge A Student Loan In Bankruptcy?
Probably not. Bankruptcy law allows you to discharge a student loan only if having to pay it will create an undue hardship. Unfortunately, that’s a pretty tough standard to overcome.
Andy Miofsky wrote an excellent comment about student loans in Illinois and what undue burden means. As Andy noted, Illinois, like most of the country, including California, follows the leading case of Bruner v. Higher Education Services, Corp., 831 F.2d 395 (2nd Cir. 1987). This case sets out three conditions to prove hardship and it’s not enough to simply prove permanent disability or that you can never work again. You must also show that you attempted to pay back the loans.
But there is some relief. Once there’s a determination of permanent disability by the Social Security Administration or other reliable source (your doctor, for example) you can apply for a Loan Discharge Application for Total and Permanent Disability. This is a fairly simple form from the Department of Education that your loan company (often Sallie Mae or ECMC) can give you if you ask. You can fill it out, get your doctor to sign it and submit it back to the company.
There are other programs as well, sponsored by the US Department of Education to help consolidate loans, reduce interest, or reduce the amount of the monthly payments.
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