If you file for bankruptcy under Chapter 7, you should be aware that not all debts are eliminated (or "discharged") once the bankruptcy process is complete. Generally speaking, in a Chapter 7 proceeding, the following debts are not discharged:
As noted in the above list, educational loans are generally not discharged by a Chapter 7 bankruptcy. They may be dischargeable, however, if the court finds that paying off the loan will impose an "undue hardship" on the debtor and his or her dependents.
In order to qualify for a hardship discharge of a student loan, the debtor must demonstrate that he or she cannot make payments at the time the bankruptcy is filed, and will not be able to make payments in the future. The debtor must apply for the hardship discharge before discharge of the debtor's other debts is granted. Application for a hardship discharge is not included in the standard bankruptcy fees, and must be paid for after the case is filed.
The Bankruptcy Code does not specifically define the requirements for granting a hardship discharge of a student loan. Courts have applied different standards, but they often apply a three-part test to determine eligibility:
Additional Non-Dischargeable Debts
In addition, the following debts are not discharged if the creditor objects during the case and proves that the debt fits one of these categories:
Get a Handle on Your Debts by Speaking with a Bankruptcy Attorney
Even the most well-executed bankruptcy filing will leave you with certain debts in many cases, including student loans and child support obligations. A lawyer can help explain the scope of which debts may not be discharged in a Chapter 7 filing and provide you with suggestions for how to best manage these debts. Contact a local bankruptcy attorney today.
Contact a qualified bankruptcy attorney to find out your options for navigating the best path forward.