Student Loans

1. NO.  The term “student loan bankruptcy” is simply a slang term often used by debtors looking to discharge their student loans in bankruptcy.   While it is not impossible to discharge your student loans in bankruptcy, it is more of a rarity than the norm.  Debtors begin by filing either Chapter 7 bankruptcy or Chapter 13 bankruptcy, followed by filing an adversary proceeding.  During the adversary proceeding, the debtor must demonstrate that repayment of the student loans would impose an undue hardship on his or her family.  The “undue hardship” standard is quite difficult, but not impossible.  The following is a simplified breakdown of the “student loan bankruptcy” concept:
2. The debtor files for either Chapter 7or Chapter 13 bankruptcy
3. The debtor files an “adversary proceeding” in which he or she must demonstrate that repayment of the student loans would impose an undue hardship on you and your dependents. Your creditors will be notified of the adversary proceeding and will have an opportunity to be present and to challenge your request.
4. The bankruptcy judge makes a determination. The Court’s determination can range from any of the following:
   1. 100% discharge of your student loans
   2. Partial discharge of your student loans
   3. Modification of your student loans

Denial of your request, your student loans remain in full effect.

There is no  single test that bankruptcy courts use to determine undue hardship, however the Court may look at the following factors to determine whether requiring you to repay your student loans would cause an undue hardship on you and your family:

1. If you are forced to repay the student loan, you would not be able to maintain a minimal standard of living.
2. There is evidence that this hardship will continue for a significant portion of the loan repayment period.

You made good faith efforts to repay the loan before filing bankruptcy.

If you are struggling with non-dischargeable student loan debt, take heart, there are more options to consider.  The best place to start is by calling your loan servicer.  In many cases there may be several options including different repayment plans, deferments, and student loan forgiveness programs.  Below is a short sample of student loan forgiveness programs for qualified educators and public employees:

1. Public Service Loan Forgiveness: If you are employed by a government or not-for-profit organization, you may be able to receive loan forgiveness under the Public Service Loan Forgiveness (PSLF) Program.
   PSLF forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.

1. Teacher Loan Forgiveness: If you teach full-time for five complete and consecutive academic years in a low-income elementary school, secondary school, or educational service agency, you may be eligible for forgiveness of up to $17,500 on your Direct Loan or FFEL Program loans.

On March 27, 2020, President Trump signed the CARES Act into law, which, among other things, provides broad relief for federal student loan borrowers.Your payments will automatically stop from March 13, 2020, through Sept. 30, 2020.

To provide relief to student loan borrowers during the COVID-19 national emergency, federal student loan borrowers are automatically being placed in an administrative forbearance, which allows you to temporarily stop making your monthly loan payment. This suspension of payments will last until Sept. 30, 2020, but you can still make payments if you choose. Be sure to contact your loan servicer to verify all details, including how interest on your student loan may accrue during the administrative forbearance.  Again, please note that a forbearance is NOT the same as loan forgiveness.