Student Loans and Consumer Bankruptcy - Are They Discharged?

Educational loans are generally not dischargeable in a chapter 7 or chapter 13 bankruptcy.  They may be 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 the hardship discharge, the debtor must be able to demonstrate that he or she cannot make payments at the time of the bankruptcy filing and will not be able to do so in the future.

The debtor must apply for the hardship discharge before the discharge of the other debt is granted.

The Bankruptcy code doesn't specifically define the requirements for granting a hardship discharge of a student loan.  Courts have applied some different standards, but they often apply a three part test to determine eligibility.

1.  income - if the debtor is forced to pay off the student loan, he or she will not be able to maintain a minumum standard of living ofr himself or herself and his or her dependents;

2.  duration - the financial circumstances that satisfy the income test will continue for a significant portion of the repayment period and

3.  good faith - the debtor has made a good faith effort to repay the loan prior to filing the bankruptcy.


If you are considering bankruptcy to deal with your student loan debt, get some good legal advice first.  It may be a waste of time and money and there are some other things you can do to deal with the student loan.