Will bankruptcy include my student loans?
Like many Americans, you followed the advice of well-meaning people who urged you to go to college. Perhaps you even got your post-graduate degree expecting that it would open many doors for you and save you from financial struggles. Unfortunately, even a degree from a prestigious university cannot guarantee financial security, and right now, you may be dealing with the same difficulties many in Pennsylvania are experiencing.
On top of your other debts, you also have thousands in student loans to repay. This may not be as easy as you expected, especially if you were unable to find work in your chosen field or you have suffered other kinds of setbacks in your life. While it is notoriously difficult to obtain relief from student loans, there may be some options available to you.
Proving a hardship
If you are facing overwhelming debt and you have exhausted other solutions, you may be considering bankruptcy. Chapter 13 bankruptcy allows you to submit a repayment plan for many of your unsecured debts, such as medical bills and credit cards, with the goal of having the balance of those debts discharged at the completion of the plan. However, student loans are generally not included in the kinds of debts that qualify for discharge.
It is possible to request an adversary proceeding along with your bankruptcy filing. An adversary proceeding is a lawsuit seeking approval for you to include your student loans with your Chapter 13 payment. You will have to prove that repaying them will be a hardship for you and that you have made a good faith effort to repay them. A hardship may include:
- Having income below the federal poverty level for a number of years
- Expecting no improvement in your income for the future
- Having a debilitating injury or illness or a spouse with such a condition
- Going through a divorce that permanently damaged your finances
- Depending on public assistance or members of your family for financial support
For bankruptcy courts to accept that you have a hardship that prevents you from repaying your student loans, your situation must have little chance of improvement. This is often a very difficult standard to reach, but if successful, it could lower your monthly payments and perhaps qualify your student loans for discharge. If not, Chapter 13 bankruptcy may provide you with enough relief from your other debts that you will be better able to manage your student loans and repay them without having them discharged.