Back in the 1970s college students could have their student loans forgiven or at the very least by themselves some time by declaring personal bankruptcy. However back in 1998 this loophole was closed! The law was changed in such a way that it made student loans pretty much nondischargeable!

In other words today when a student declares personal bankruptcy, student loans still will have to be paid. It’s almost impossible to get out of it, however there are free extremely difficult to fulfil criteria were a student could get past the nondischargeable rule providing they did indeed fulfil all three of them. They are as follows:

1 -If you can prove that paying the loan payments would force you below those that the minimum standard of living.

2 – if you can prove that making these payments will plunge you into total poverty during most of the time you are required to make the student payments.

3 – if you can prove you have been attempting to pay for your student loans for some time before your filing for personal bankruptcy. Very often you won’t be able to discharge your personal student loans until you have been making payments for five years.

So what options does a student in this situation have?

As you can see there really aren’t many options open to you if you need to declare personal bankruptcy, student loans however can often be consolidated which for many people can make the whole process of paying them back a whole lot easier. Another thing that a very tiny percentage of students benefit from is when there college closes permanently before their graduation, in these situations students often have a pretty good chance at getting out of their loans, but naturally that doesn’t help 99.9% of students.

If however a student’s loans have been consolidated and already been stretched out for years, sometimes it can actually be difficult to work out who is owed what. In this situation a student may be able to challenge the very enforceability of the loans. The students creditors are the ones who must legally prove what the student in question owes them, so if they cannot do so anymore they would not be able to force the student to pay them any longer.

So at the end of the day for most students thinking of declaring personal bankruptcy, student loans are still going to be an issue for them to pay off although they will be able to benefit from consolidation of loans and probably paying scheme that better suits their situation. At the end of the day though whatever happens your creditors should not be allowed to take more than a 10% portion of your monthly pay cheque for the paying off of personal student loans.

However if the student has a fairly large student loan debt, bankruptcy can often be an option to be used to get rid of additional unsecured loans which in doing so can give the student more money to help pay off his/her actual student loans. It is also true that although the government has done a lot to make sure that federal student loan bankruptcy cannot be carried out, they have thankfully provided other ways to help students such as, limiting the amounts that the student can be made to pay for his or her student loans depending upon how much income he or she has. It was also true that in some cases when a student has an excessive amount of debt sometimes he or she can obtain some financial aid.

Additionally within the bankruptcy law there is a clause that states if it can be proven that obligating a student to pay his or her loans would result in undue hardship upon his or her shoulders, the elimination of debts will be performed. However the truth is that it is extremely difficult for a student to prove that he or she is under an undue hardship and so students rarely manage to achieve a total elimination of their debts.

Chapter 13 bankruptcy, one of the few options?

Avoiding any aggressive and ugly collection actions can sometimes be achieved with a federal student loan bankruptcy using the 13th chapter of bankruptcy. But only if the person in question meets all the necessary criteria. What can happen if all goes well is that a court trustee may oversee loan repayments and make sure that while loans are being paid off the students still has enough income to survive. If this does happen the rate that the student will have to pay for his or her loans will not necessarily always be the same during the chapter 13 bankruptcy, for instance if the persons income happens to increase the student debtors will be in their right to demand a higher rate.

The reality is that most students will not be able to eliminate their debts with a federal student loan bankruptcy, but most will be able to have other obligations released/eased so that their main student loan debts will be possible to be managed.

Remember the best way to go about your debts and bankruptcy is to acquire the skills of a trained lawyer to deal with your case and advise you on what you should do, it will cost you but then in the long run it will probably turn out for the best.

So if you need to file US bankruptcy on student loans you are going to have to prove that there is no way you are financially capable of paying off your student loans by your payments schedule and for that matter in the coming years after your payments are due. You will also need to prove that you have been truthful and will continue to be so with your creditors so that the judge reviewing your case will be able to trust that you truly cannot financially pay off your student loans.

It’s all up to your judge

At the end of the day when you go about filing US bankruptcy on student loans the end decision is in the hands of the judge reviewing your case. If you’re done a good job in presenting your case you may find that the judge will indeed discharge your loans either partially or entirely. Remember that whatever happens during the proceedings you must not acquire any new loans during this time.

Student loans are typically fairly flexible with many different options available to the student, because of the extra complication this can bring, this is often the reason why students apply for loans they cannot fund in the long run.

If you’re a student who has got yourself into this situation it is very important that you thoroughly look into all of your options and only try to take on the US bankruptcy student loans option if it really is your last resort.

In most cases it is estimated that only 10% of the students pay can be used in the paying off of his or her student loans. A student before filing for US bankruptcy student loans should talk directly with his or her lender to see if there is any way of keeping their monthly student loan payments to an amount they are capable of dealing with.

Filing for US bankruptcy on student loans will not mean that any financial aid administrators will be able to refuse you for any new loans, however they will be able to refuse you for a new loan if your credit history following your US bankruptcy with student loans is not to their liking.

Remember, filing for bankruptcy must always be your absolute last option and filing for US bankruptcy on student loans is definitely no exception. First you must consult with either your lender or the administrator in charge of student loans in your school, and of course you should do as much research on the subject of filing for US bankruptcy on student loans as possible to make sure you are taking the best possible action for your situation.

Today, anyone attempting to claim Chapter 7 bankruptcy has to show that an undue financial hardship will result if the loans in question are not discharged. Since in a lot of cases with filing bankruptcy and student loans make up a very large portion of the individual’s debts, it is possible that a portion of the loan may be discharged by the judge, but in most cases a large proportion of the loan will still remain as a legal debt. In some other cases when filing bankruptcy and student loans are reviewed, if the loans are found to have been sold on multiple times to other lenders and with changing interest rates it can be very difficult to determine an exact balance, in these cases, if you’re lucky some or all of the loan could be discharged.

Abiding by the provisions of Chapter 13 bankruptcy, it is possible for a debtor to have arranged all of their unsecured and secured debt to become part of a repayment plan through the services of a court trustee. In these cases of bankruptcy and student loans happen to be included; the person has to meet specific criteria, for example: showing that they do indeed have the sufficient amount of capital available to make the monthly payments determined by the court to pay off their total debt within a five years period.

Proving the debtor has the capital to pay

He’s an example: if someone has a total outstanding debt filed in bankruptcy court of say $100,000, the trustee will them divide the $100,000 total by 60 months (5 years) to come up with a monthly payment of $1,667. If that someone can actually show that they do indeed have earning of that amount plus the necessary capital living expenses, it may be possible for them to file Chapter 13 bankruptcy and student loans could be included in the amount.

Having said that, if someone’s capital each month does allow for all their expenses counting the payment to the court, Chapter 13 won’t be allowed. Another option could be to file Chapter 13 bankruptcy to get rid of most of their other debts, thus freeing up funds to be able to pay the student loans. For a lot of people filing bankruptcy and student loans payments afterwards will put a big dent in their income, but with any luck after a period of time, it may be possible for them to secure a loan with lower interest rates and lower payments to pay off their student loans.

So filing bankruptcy and student loans don’t always mix well, but it’s not impossible to do in some cases. If you think you have a chance and you have been advised that bankruptcy is the right option for you, then you can give it a try, but like as always treed carefully, bankruptcy is serious business.