Can student loans be discharged in bankruptcy?
Yes, Student Loans Can Be Discharged in Bankruptcy in certain situations. You May Have More Options Than You Think.
For years, we have been told that student loans cannot be discharged in bankruptcy. That is simply not true.
Student loans are treated differently from credit cards, medical bills, and other unsecured debts, federal bankruptcy law allows qualifying borrowers to seek relief from student loan debt when repayment would create an undue hardship.
In November 2022, the U.S. Department of Justice and Department of Education introduced a more streamlined process for evaluating federal student loan discharge requests in bankruptcy. This process is designed to make it easier for qualifying borrowers to demonstrate financial hardship and pursue relief.
At Lynn Law Group, our Florida bankruptcy attorneys help individuals explore whether their student loans may qualify for discharge through Chapter 7 or Chapter 13 bankruptcy.
How Do You Discharge Student Loans Through Bankruptcy?
Unlike most unsecured debts, student loans generally are not automatically discharged when you file bankruptcy.
Instead, borrowers typically must file a separate lawsuit within their bankruptcy case called an adversary proceeding. Through this proceeding, the bankruptcy court determines whether requiring repayment of the student loans would impose an undue hardship on the borrower and their dependents.
The process involves:
- Filing or having filed bankruptcy. Student loan discharge proceedings take place within a bankruptcy case. In some circumstances, a previously closed bankruptcy case may be reopened (we are so excited to be able to help both our former bankruptcy clients and people who may have filed their underlying case with someone else too!)
- Evaluating your financial circumstances. We review your income, living expenses, student loan obligations, and other factors that may establish undue hardship.
- Filing an adversary proceeding. This is a separate legal action requesting that the bankruptcy court determine whether your student loans can be discharged.
- Presenting your financial hardship. For eligible federal loans, the Department of Justice's standardized process may allow your circumstances to be evaluated using a financial attestation and supporting documentation.
- Obtaining a court determination. If the applicable legal requirements are satisfied, the bankruptcy court may grant a full or partial discharge of qualifying student loan debt.
Who May Qualify for Student Loan Discharge?
Student loan discharge isn't limited to people who cannot work.
The evaluation generally considers whether:
- Your current income and necessary living expenses leave you unable to maintain a minimal standard of living while repaying your student loans.
- Your financial circumstances indicate that your difficulty repaying the loans is likely to continue.
- You have made good-faith efforts to address your student loan obligations.
Each case requires an individualized legal and financial evaluation. Having student loan debt, experiencing financial hardship, or filing bankruptcy does not automatically establish eligibility.
What If You Already Filed Bankruptcy?
Your bankruptcy case may be closed, but your student loan discharge options may not be!
In certain circumstances, individuals who previously completed Chapter 7 or Chapter 13 bankruptcy may be able to reopen their cases and pursue a separate student loan discharge adversary proceeding.
This may be possible even if your original bankruptcy was handled by another attorney.
Florida Student Loan Bankruptcy Attorneys
At Lynn Law Group, attorneys Veronica Batt and Adrian Lynn represent individuals and families seeking debt relief throughout Fort Myers, Cape Coral, Naples, Estero, Bonita Springs, and across Florida remotely.
If student loan payments are creating an ongoing financial burden, we can help you understand whether bankruptcy and a separate student loan discharge proceeding may offer a path forward.
What once felt like a debt that would forever survive bankruptcy, may not be since the guidelines have changed.
Contact Lynn Law Group to request a student loan discharge evaluation.
Disclaimer: Student loan discharge is not automatic or guaranteed. Eligibility depends on the type of loan, the borrower's circumstances, applicable law, and a bankruptcy court determination. This information is educational and does not constitute legal advice.