By: Darrell Castle
At some point, I personally think student loans will be dischargeable through bankruptcy.
Will student loans ever be dischargeable in bankruptcy?
Hi I’m Darrell Castle and I’m an attorney licensed to practice law in the state of Tennessee and the answer to that question is MAYBE. Maybe they will.
I personally think they will be dischargeable in bankruptcy at some point. There is now action in Congress and President Obama has expressed some support for it. I think it’s probably too soon to see it come during his administration. But as I said, there is movement in Congress to look at some discharge-ability in some form.
Right now in Chapter 13, you can include a student loan and pay it back in full over the five year term of your plan with interest. And if you owe only $10,000 let’s say, you’ll be able to handle that quite easily. But let’s say you owe $50,000 or $100,000, then that’s a little more difficult.
But if you have other debts like credit card, medical bills and things of that nature, then the Chapter 13 might reduce your obligation to the point where you can afford the student loan payments in Chapter 13. But if you can’t, then you should at least be able to delay them until you don’t have any other debts, which would make repayment a little more simple.
But discharge-ability in bankruptcy is not there yet unless you have an undue hardship. That is very difficult to prove. You have to be disabled. And basically, unless you’re disabled, you’re not going to prove undue hardship. Not in this generation anyway. It is close to an impossible situation.
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