The laws concerning whether a student loan could be discharged have changed over the years so do not rely on what you may have heard from a “friend”.
At one time, if loans had been in repayment status for at least 7 years, they could be eligible for discharge. Then changes in the late 90’s made it impossible to discharge any student loan that was a federally funded (government-backed) loan, no matter how old the loan. Then in the Bankruptcy Reform Act of 2005, further changes made even private student loans non-dischargeable, thus closing almost any loopholes.
The short answer today is that a student loan is NOT dischargeable, with only one exception. If you can demonstrate an “undue hardship” if you had to continue repaying the loan, the court may allow it to be discharged, but not without a separate proceeding being filed in the bankruptcy court, called an “adversary proceeding”. In this proceeding, you would have to persuade the court that you could not take care of yourself or your family if you had to pay the loan. It is a very, very high hurdle to clear, almost akin to showing you are at or below the poverty level and/or living under a bridge!
Even though your student loan will not likely be discharged, filing for bankruptcy may still be a good option for you. It could give you enough relief from all your other debt payments so that you can afford to repay the non-discharged student loan. The same is true of most taxes. Unless they are income taxes at least three years or more past due, they are not likely to be discharged, because Congress wrote the bankruptcy code to protect debts owed to the government. However, an adversary proceeding is not necessary to discharge certain taxes and it is more common to find some taxes eligible for discharge than student loans. Again, even if some portion of taxes are not discharged, obtaining relief from your other debts should allow some “breathing room” to enable you to repay those taxes and debts owed to the government.
For more details on these and other debts that may or may not be dischargeable in bankruptcy (such as alimony, child support, tickets and fines) contact us at Robinson Law Offices P.C.. We are happy to answer all your specific questions.
