Discharging Student Loans
Solutions from a Phoenix Bankruptcy Lawyer
When you are overwhelmed by financial burdens, bankruptcy may offer you
a way out. Chapter 7 and Chapter 13 bankruptcy can help individuals wipe
out some of your debts. This is known as "discharging" a debt.
In certain circumstances, you may even be able to discharge your student
loan debts. However, this requires individuals to take special measures
during bankruptcy.
If you are attempting to discharge your student loans, contact Leonard
V. Sominsky, ESQ., PC. Our
bankruptcy attorney in Phoenix has been handling complex bankruptcy cases since 2000, and he continues
to serve his clients with dedicated representation and effective legal
guidance. Discharging your student loans may be an essential step in the
process of getting back on your feet and securing a rewarding future.
How Do I Start the Process?
To begin the process of having your student loans discharged, you must
file a Complaint to Determine Dischargeability, which is separate from
your bankruptcy case. After filing the complaint, individuals must meet
specific requirements in order for the court to approve the discharge
of their student loans. Whether you are filing under
Chapter 7 or
Chapter 13 bankruptcy, you may be able to have your loans discharged if you meet
the requirements.
Passing the Brunner Test
In order to discharge your student loans in a bankruptcy, you must be able
to prove that repaying your loans would cause you "undue hardship."
Undue hardship is measured by the Brunner test, which requires bankruptcy
filers to meet specific criteria in order to be eligible to have their
student loans wiped out.
The requirements of the Brunner test are the following:
-
Poverty – You cannot maintain a standard of living while also paying loans
-
Persistence – Your finances will likely stay the same during repayment
-
Good faith – You made an effort in good faith to repay your student loans
You may have made every possible effort to repay your debts, but sometimes
a situation may be too difficult to handle on your own. Look to the future
with a Phoenix bankruptcy lawyer at our firm and take positive steps to
eliminate your financial burdens. We understand that individuals are not
always at fault—retain the help of an experienced legal professional
and set things right.
Meeting the Persistence Requirements
One difficult aspect of discharging student loans is meeting the "persistence"
requirement of the Brunner test. It may be hard to determine if your financial
situation will remain the same for the majority of a repayment period.
If there is no evidence, a court may presume that your income will increase
over time, making it possible for you to repay your loans. However, a
2006 court case ruling referred to as "In re Nys" has created
several other circumstances that may be considered in the Brunner test.
There are several factors affecting persistence in the Brunner test, such as:
- Serious mental/physical disability
- Obligations to dependents
- Lacking/limited/poor education
- Number of years remaining in work life
- Lack of assets
- Lack of better financial options
Get Temporary Relief If You Cannot Discharge Your Debt
If you are unable to discharge your student loans, there are other options
that may be available. With Chapter 13 bankruptcy, you may establish a
payment plan for your student loans that reduces payments over the course
of three to five years. If you have federal student loans, the Department
of Education may help to make your payments more affordable, or even cancel
the loan entirely.
Leonard V. Sominsky, ESQ., PC has helped over 1,000 Arizona residents ease
their financial burdens. Discuss your situation with our bankruptcy attorney
in Phoenix and find out which course of action may offer you a favorable
resolution.
Schedule a free case consultation and explore your options!