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Can bankruptcy eliminate student loan debt?

There is a lot of debate about what to do to help the many Americans who are drowning in student loan debt. Reports often state that this debt cannot be a discharge in bankruptcy, so people carry it, hurting their credit and growing their debt further as they go throughout their lives. Guess what, Tennessee residents may actually be able to have their student debt discharged through bankruptcy, but it can be difficult to accomplish.

How can student loans be a discharge through bankruptcy? Everyone else says it is impossible. The truth is, there are never any guarantees that it will work, but that doesn't mean it is not worth trying.

Undue hardship

In order for a bankruptcy court to consider discharging student loan debt, you have to prove that paying the debt presents an undue hardship on your life. To show that you qualify by filing an undue hardship claim, you must:

  • Prove that making your student loan payments would prevent you from providing for your basic needs.
  • Provide evidence that additional circumstances, such as a disability or health problems, max out income in your field, or that poor education makes it impossible for you to meet your debt obligation.
  • Show that you have tried your best to pay your loan.

Technically, there is no definition for undue hardship in bankruptcy code, so the decision as to whether your circumstances qualify for this type of relief will all be up to a judge's discretion.

How to file for student loan discharge

Before you can ask for the discharging of student loan debt, you need to file for bankruptcy. There are two types of consumer bankruptcy: Chapter 7 and Chapter 13. Legal counsel can guide you through the difference and help you choose the type that fits your specific needs.

During the bankruptcy process, you may file a complaint for an adversary proceeding. This is where you state your case for undue hardship. At the end of litigation, the judge will decide if part, all or none of your student loan debt qualifies for discharge.

What if it doesn't work?

If your undue hardship complaint fails to produce desirable results, but your bankruptcy filing does grant you some debt relief, that will free up some funds for you to pay down your student loans. You may also be able to work with your lender to create a repayment schedule that works with your current budget.

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Rothschild & Ausbrooks, PLLC
1222 16th Avenue South, Suite 12
Nashville, TN 37212

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