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Student loan debt

Chapter 7 and Chapter 13 bankruptcy proceedings can discharge, or eliminate, many types of debts. These include old medical bills, credit card debt, past due utility bills, and collection agency accounts. Other debts, such as student loans, may only be dischargeable under certain circumstances. To determine whether you might get your student loans discharged, talk to a bankruptcy lawyer about your unique situation.


Undue Hardship

The primary way in which student loans may be discharged is by proving that paying the debt will cause an undue hardship. There are different tests that bankruptcy courts can use to determine whether a bankruptcy filer qualifies under the undue hardship clause. The Brunner test is most commonly used. It requires proof that the following situations apply to the debtor:


  • Good faith efforts to repay the loan have been made.
  • A minimal standard of living is impossible if the debtor is forced to repay the loan.
  • These hardship conditions are likely to persist throughout most of the life of the loan.


Student Loan Loopholes

Individuals with student loan debt might still have options even if they don’t pass the Brunner test. There are a few loopholes that a skillful bankruptcy attorney might use, including the following:


  • The debtor wasn’t an “eligible student” at the time the loan was made.
  • The loan wasn’t issued to pay “qualified education expenses.”
  • The loan wasn’t issued to pay for attendance at an eligible educational institution.


An eligible educational institution is one with accreditation under Title IV of the Higher Education Act.


Repayment Options

Even if your student loans aren’t dischargeable in bankruptcy, going through bankruptcy may help you pay them off. This is because bankruptcy is a viable option for discharging other types of debt, including credit card balances, personal loans, and medical bills. Once you’ve been relieved of the burden of making payments on those debts, you’ll find that it’s far easier to pay off the balance on your student loans. Additionally, there are other repayment options you might consider. You may qualify for an income-based repayment plan, which will reduce your payments to a manageable amount. Or, you may qualify for the Public Service Loan Forgiveness program.


The bankruptcy lawyers at Cutler & Associates, Ltd. will exhaust all possibilities to help you deal with your student loan debt. Our bankruptcy law firm has earned a sterling reputation for our commitment to client care and comprehensive legal guidance. Individuals in the greater Chicago area are invited to call (847) 961-4572 to request a free consultation.