In the majority of courts, you can either obtain the discharge of all your student loans, or you cannot have them discharged at all. However in some courts, student loans may be partially discharged if undue hardship is proven.
It is tough to pass the undue hardship test, but it is possible. A scholastic paper released in the American Bankruptcy Law Journal discovered that at the very least 40% of debtors that include their student loans in their filing for bankruptcy had been able to have some or all of their students loans discharged.
One purpose of filing Chapter 7 or Chapter 13 bankruptcy is to be relieved of financial debts. However, specific financial debts are nondischargeable, student loans are usually among them. The single exemption is when a debtor can prove that paying off student loans will lead to undue hardship. If you can prove this, you may just be able to have your student loans discharged.
Typically if you wish to discharge student loans, you will be required to file a Complaint to Determine Discharge-ability with the bankruptcy court. This launches an adversary proceeding, aside from you bankruptcy case. You will need to prove to the court that requiring you to pay off your loans will cause undue hardship. To further strengthen your case, it will be better to present other defenses to your creditors proof of claim, such as breach of contract or unfair business practices. Once this is done, the court may consider discharging you of your debts.
It is best to consult the best bankruptcy lawyers in Arizona in order to find out what are the options available to you. Our bankruptcy attorneys at Zolman Law will be happy to answer your questions on your student loan discharge.
What is An Undue Hardship Test?
Undue hardship is figured out according to various tests, depending upon the court, yet the majority of courts give an undue hardship motion in the rarest of circumstances. Usually, you can get a student loan discharge only if you if you experiences severe disability that no longer enables you to work and have dependents, or if you are already a senior citizen. It is smart to get in touch with a seasoned bankruptcy lawyer that is aware of the undue hardship test and how it is applied in your local bankruptcy court. If your bankruptcy lawyer is aware what courts in your location have granted this motion in the past, you will certainly have a far better possibility of encouraging the court. Furthermore, a lawyer can assist you in coming up with defenses to a creditor’s proof of claim.
Among the tests utilized by courts is the Brunner test. Under the Brunner examination, you can only discharge student loans if:
- Paying back the student loans would certainly lead to you as well as your dependents live in hardship and also make you incapable to keep even a basic standard of living;
- Your circumstance will certainly continue over the same time as your student loan repayment period; and also
- You have actually made a good-faith initiative to pay off the student loans.
An additional examination made use of is the “totality of circumstances test.” Under this test, courts take a look at all appropriate aspects to make a decision whether repaying your student loans presents undue hardship.
If you cannot pass the undue hardship test, and you have actually filed for Chapter 7, you will certainly still owe the student loans after your Chapter 7 case is done. Nonetheless, if you filed for Chapter 13, you may negotiate to pay a reduced amount during your Chapter 13 repayment plan, spread out in a course of three to five years. However, when your Chapter 13 case has ended and your consumer debts are discharged, you will still be required to pay off your student loans.
Consulting an experienced bankruptcy lawyer in Arizona is your best bet to fully understand the implications and the nuances of bankruptcy on your student loans. Call us now at Zolman Law. We may be able to help you on how to deal with your student loans.