Student loan Consolidation

can student loans be filed on bankruptcy claims

June 29th, 2007 Subscribe To Our Feed

Can student loans be filed on bankruptcy claims?

Federal Loans are not dischargeable through bankruptcy. If you are having a government sponsored loan or one issued by a non-profit making institution, then even if you go through bankruptcy you will have to re-pay the loans.

If the loan is not a goverment loan or from a non-profit group then you can have the bankruptcy court drop the student loan payments in full or partial. You have to prove undue hardship. In the vast majority of cases you will NOT be able to prove this and will still have to pay the loan.
With regard to non-governmental loans too, the borrower will have to prove that repayment of the loan will create an undue hardship on him and his family in that he may not be able to maintain even a minimal standard of living if he were to pay the loan. It will also have to be demonstrated that an effort has been made to honor the payments; but that this level of hardship is now permanent and is not likely to improve substantially with time. But this will be a very difficult point to prove.

Even if you do have to re-pay the student loan only 10% of the induviduals take home pay can be garnished.
Ways around filing bankruptcy with student loans

Contacting the organization that holds your loan can go along way. They may be able to deffer payments for 6 months or a year until you are able to re-pay. They may also extend the life of the lower to lower the payments.
It is in your interest to try and work out some alternate arrangement before you go in to default of your loan, because once you are in default, the options available to you to normalize the situation would diminish.

You may qualify to have your loan discharged by bankruptcy if you could not complete your study program under one of the following conditions:

1. The school closed while you were enrolled.
2. If you were on an approved leave of absence when the school closed.
3. The school closed within 90 days of your withdrawing from the school.
4 Disability
Further, a parent who has obtained a PLUS Loan on behalf of a student who becomes totally and permanently disabled is not qualified to claim discharge of loan taken by him (the parent).

So to answer your question “can student loans be filed on bankruptcy claims” The answer is NO if it’s a federal loan or non-profit and yes if it is not but you still have to prove UNDO HARDSHIP. This can be very hard to do.