It is frequently stated that you cannot discharge students loans by filing for bankruptcy. While that is generally true, it is not always the case. The frequently cited case of Brunner v. New York State Higher Education Services Corporation, 831 F.2d 395 (2d Cir. 1987) does hold that a bankruptcy filing can discharge a student loan if each of the following elements are met:
- The Debtor will not be able to maintain a “minimal” standard of living if the Debtor is forced to repay the student loans;
- It is likely that the Debtor’s financial circumstances will persist;
- The Debtor made good faith efforts to repay the loans.
Additional Considerations for Discharging Student Debt
Not even creditors holding educational debts should be in a position to force a debtor to be in bondage for the rest of their lives. If the debtor has sustained a serious injury which impacts on his or her ability to work, the resultant financial circumstances is likely to persist.
Finally, if the debtor did make good faith efforts to pay within the debtor’s means, a bankruptcy filing may result in discharging the debt. In some instances a court has the discretion to reduce the debt in part so as to relieve the burden of the payments. Or the court may reduce the interest rate to make it easier on the debtor. Or the court may reduce the amount of the debt and also reduce the interest rate.
If you are saddled with a mountain of educational loans, you should not automatically assume that a bankruptcy filing cannot help. Discharging an educational loan, however, is not something that you should try and do alone. You will need a lawyer.
We at the Bankruptcy Advocates have had extensive experience dealing with educational loans. Consider scheduling an appointment if you need advice as to how to deal with educational loans. The initial consultation is always free. Give us a call. Let’s talk.
Southern Illinois Bankruptcy Attorney law firm Bankruptcy Advocates is located in Carbondale and serves a wide geographic community. The first consultation is always free. Give us a call at 618-549-9800 or email us at [email protected] to speak about your case or legal matter. Convenient appointment times are available.