Category Archives: Student Loans

Options For Eliminating or Discharging Student Loan Debts


Student loan debts are increasingly becoming problems for graduates once students hit the job market. We have all heard in the news that Congress is discussing student loan debt legislation to reduce interest rates and make paying back student loans possible. Bankruptcy attorneys are seeing more and more potential clients with student loan debts that cannot be paid back based upon the persons income and expenses.

Get rid of your student loans.

There are options to lower, eliminate or discharge student loan debts.

There are options if you have defaulted on your student loan payments. The following are possible options to help get rid of or discharge student loan debts depending upon your circumstances. You are part of the Federal Family Education Loan Program, William D. Ford Federal Direct Loan Program or the Federal Perkins Loan Program. School Closure: If the university or school you attended closed you may be able to have your student loan debts forgiven. You will need to know the dates you attended the school, the date the school closed, whether you were enrolled at the time the school closed and if you completed your course of study. False Certification/Ability to Benefit: Another way to potentially have your student loans discharged is proving that you did not have the ability to benefit from the school program you incurred the student loan debts for. If you did not graduate high school or obtain your GED before being enrolled you have an argument that you did not have the ability to benefit from the course work. You will need to know the dates of attendance of the school, did you receive a GED at the time of enrollment, did the school give an entrance examination to test your ability to benefit from the program and did you complete a development or remedial program at the school? False Certification (Disqualifying Status): If at the time you obtained the student loans you failed to meet the legal requirements for employment in your state of residence in the occupation for which the program of study was intended because of age, a physical or mental condition, criminal record or other reason. Your disqualifying status could be age, physical condition, mental condition, criminal record or some other reason. Total and Permanent Disability: If you claim that you are totally disabled and can no longer work you will need to show that you have little or no ability to engage in substantial gainful activity. You will need medical records to prove your mental of physical impairment. You will need to describe your limitations. Teacher Loan Forgiveness: There is a special forgiveness or discharge for teachers. You must have taught for five consecutive complete academic years at an elementary school or secondary school. This program does not consider school librarians, guidance counselors and other administrative staff as teachers for this program.

Filing Bankruptcy and Claiming an Undue Hardship

In 2005 the Bankruptcy Code was changed to not allow private student loans to be discharged when filing bankruptcy. Student loans can be discharged when filing bankruptcy if you sue the student loan company in an adversary proceeding and claim an undue hardship. Most jurisdictions use the Bruner Test or some variation of the Bruner Test. To prove an undue hardship and have your student loans discharged you will need to prove that: 1) you cannot maintain, based on your current income and expenses a minimal standard of living for yourself and your dependents if you have to repay your student loans; 2) it is likely that the undue hardship or circumstances are likely to continue for a long period of time or a significant portion of the repayment period; and 3) you made a good faith effort to repay the loan.

Filing A Chapter 13 Bankruptcy Case

Filing a Chapter 13 bankruptcy case can help to hold off or reorganize your debts. You bankruptcy lawyer will be able to explain the process in more detail. In a Chapter 13 Plan of reorganization you can pay back what you can afford and no more. If your student loan minimum payments are $750 a month and you only have $200 in disposable income to pay you should only pay $200 a month in a Chapter 13 Plan. You will be forcing the student loan companies to take less than what they say is the minimum payment. Chapter 13 plans can last for a maximum of 5 years. After the 5 years is up you will need to make payment arrangements with you student loan company again. You will have obtained 5 years of relief though.

Student Loans and Bankruptcy

By Kitty J. Lin, Attorney at Law

More and more people are going back to school, especially in a bad economy, so they can better themselves and further their education, in the hopes of obtaining that elusive job. In certain situations, that is most definitely true. These recent graduates have more job opportunities than before. However, not everyone achieves these dreams. They are left with hefty student loans and no job, so they have no way of repaying these debts. Unfortunately, most of the time, filing for bankruptcy will not discharge these student loans either.

The Ninth Circuit has adopted what is now commonly known as the Brunner Test, in Brunner v. New York State High Education Services Corp., 831 F.2d 395 (1987, 2nd Cir.). Under the Brunner Test, in order to discharge your student loans in bankruptcy, you need to prove:

1. That you cannot maintain, based on current income and expenses, a ‘minimal’ standard of living for yourself and your dependents if forced to repay the loans;

2. That additional circumstances exist indicating that this state of financial affairs is likely to persist for a significant portion of the repayment period of the student loans; and,

3. That you made good faith effort to repay the loans.

The hardest element to prove is the “undue hardship” test. It is not as easy as it sounds. You cannot merely prove that it is hard for you to repay your student loans. The successful cases had debtors that were never able to work again due to a physical or mental ailment. If you are able to work, chances are, you may not receive a discharge of your student loans. It is advisable that you speak with a bankruptcy attorney or bankruptcy lawyer today from West Coast Bankruptcy Attorneys for a free consultation regarding your student loans. We have offices in Redwood City, San Francisco, Oakland, and San Jose for your convenience.