Most lawyers would not recommend that you file for bankruptcy if you’re trying to get rid of your student loan debt as bankruptcy proceedings are costly and could put you in more debt. However, you do have this as an option if your debt is unmanageable and your means of income is not enough to pay off the amount of debt you have piled up.
Know that the Department of Education discourages individuals to file for bankruptcy if their student loan is the only debt they want to get rid of. So if you plan to file for bankruptcy in court with this sole purpose, then you may expect this to be rejected.
Undue Hardship
To discharge your student loans, you must show to the court that the payment of your debt will impose an undue hardship on you and your dependents. They have different tests to determine if the person does have undue hardship.
Commonly, courts use the Brunner test to know if the person qualifies to file for student loan bankruptcy. The requirements are the following:
1. Based on the debtor’s current income and expenses, they cannot maintain a minimal standard of living if they and their dependents are forced to repay the student loans
2. There are additional circumstances that exist indicating that this state of affairs is likely to continue for the majority of the repayment period of the student loans
3. The debtor has been making good faith efforts to consistently pay off the student loan
How to Specifically Determine Undue Hardship
Your student loan will not be discharged immediately even if it’s based on undue hardship. You must still first undergo adversary proceedings. This can be the tricky part as the requirements for the undue hardship are a bit too general for one to know if they meet the requirements stated in the Brunner test. However, generally, courts will deem your loan discharged if:
1. Your monthly income has been below the federal fair debt collection practices act poverty level for years and is not showing signs of improvement
2. You’re dependent on a family member or public assistance
3. You have a debilitating illness or injury, whether physical or mental
4. You have a child with a severe condition that may need constant care
5. Your separation reduced the family income
6. Your disability checks are the source of your income
7. You’re supporting a spouse with a debilitating condition
8. Your child support is dependent on public assistance
If the court finds your income cannot support your adversary proceedings, they will be waived.
If you’re looking for legal advice on the matter, you can seek help from a reputable bankruptcy lawyer in New York.
Rosenberg, Musso & Weiner L.L.P not only deals with bankruptcy cases, but they also help you with debt collection cases. If your debt collector has gone against the Fair Debt Collection Practices Act, then contact a lawyer to resolve your case.
Whether it’s bankruptcy or consumer law, our professionals at Rosenberg, Musso & Weiner L.L.P are ready to be of help.