0 Bankruptcy and Student Loans

Many people are under the impression that bankruptcy and student loans go together. When faced with outrageous prices for education it would seem that it would be an answer to many seeking relief. However, they do not mix and it is extremely difficult to have them discharged in a bankruptcy court.

Interestingly, in the 1970's it became common practice for someone to attend school and then file bankruptcy and student loans would disappear. It was a sure way to get a free education. Of course, as these cases grew, the government decided to limit the availability of this option. It became increasingly difficult to file for bankruptcy right after school. The common practice was now to wait at least seven years so the loan would be old. In order to file a person simply had to show that they had made their first payment seven years prior and that the loan was causing undue hardship. It was easy to prove the benefits of filing for bankruptcy.

In October 1998, the issue of bankruptcy and student loans again came to the forefront. The court ruled that such a case could not be filed and discharged unless three criteria were met. A person could not open a case unless they met this criterion. The first of these criteria is that you must prove to the court that you cannot keep up with your payment schedule. The second criterion is that you must prove to the court is that you are unable to pay in the future and that your financial situation is permanent. The third and final criterion is that you have made a good-faith effort to pay them back. If and only if you meet all of these criterions, may you open and file a bankruptcy and student loans case.

Even if you meet all of the requirements for opening a bankruptcy and student loans case, there is no guarantee that your loans will be discharged. It will depend on the judge that is hearing your case. Some judges will discharge some of the loans and leave you to pay part of them. Some judges will hear your case and will not discharge any of your loans. Once in awhile, a judge will take your particular case under advisement and discharge everything. This is extremely rare, but it is possible. It is not easy work to get a bankruptcy and student loans case discharged!

When you pursue your education, act responsibly and think before you apply for a student loan. Without foresight into your future, you could find yourself filing a bankruptcy and student loans case and damage the very future you have been working so hard to achieve.