Are student loans dischargeable in bankruptcy?
In almost all cases, student loan debt is not dischargeable in bankruptcy. The exception to this rule is that some student loans may be dischargeable if you can show that the loan payments impose an “undue hardship” on you, your family, and dependents. However, it is extremely difficult to prove this to the court. Therefore, student loans “survive” a Chapter 7 Bankruptcy in most situations. Debts such as credit cards, medical bills, car repossessions, back rent, unpaid utilities, and most other items in collection do not. In a Chapter 13 Bankruptcy, student loans will be paid at the same percentage as your other general unsecured creditors (credit cards, medical bills, etc.); remember, in a Chapter 13 Bankruptcy, it may be possible to pay your general unsecured creditors at a lower percentage on the dollar. However, in a Chapter 13, bankruptcy any remaining balance or unpaid portion of your student loan debt will survive the bankruptcy and you will be responsible for this amount after
In a proceeding under Chapter 7 of the Bankruptcy Code, it is presumed that many debts, including most loans, will be discharged or “wiped out.” Section 523(a)(8) of the Bankruptcy Code, however, provides that student loans cannot, for the most part, discharged in a bankruptcy proceeding under Chapter 7. A debtor would have to convince a bankruptcy court that paying the student loans would cause undue hardship to the debtor and his dependents; this is a difficult burden of proof. When the debtor is unsuccessful in convincing the bankruptcy court that undue hardship would result, he must attempt to repay the student loans. Put another way, student loans are nearly almost always considered to be nondischargeable debts. Prior to 1998, it was easier to discharge student loans in bankruptcy. Congress, however, changed the law in an attempt to make it more difficult to discharge student loans through Chapter 7 bankruptcy proceedings. It is likely that the debtor in the earlier scenario is th
