Attorney
The financial burden of a student loan can often be overwhelming for a borrower. When forced to choose between paying for basic needs like housing and healthcare, many borrowers simply cannot afford to make their loan payments. Faced with so much debt, filing for bankruptcy becomes a tempting option.
But can bankruptcy discharge student loan debt, and if so, what are the rules for doing so? Having seasoned legal counsel by your side can help you alleviate stress and pave a confident path forward to managing your debt. Count on the Hoover, AL law firm of Pleasant Legal Solutions.
Bankruptcy and Your Student Loans
A borrower may be able to discharge their student loans in bankruptcy if they file a separate action known as an adversary proceeding. This filing requests that the bankruptcy court determine that repayment of the debt would impose undue hardship on the borrower and their dependents.
“Undue hardship” is a standard that isn’t easy to meet. For one, the borrower’s creditors may be present in court to challenge this request. Also, the bankruptcy court will need to consider such factors as whether:
- The requirement to repay the loan would prevent the borrower from maintaining minimal standards of living
- The hardship will continue for an extensive amount of time during the repayment period
- The borrower made good faith attempts to repay the debt before filing for bankruptcy
There is not a single test or standard by which the court will determine the question of undue hardship. Also, the court may take other considerations into account in deciding the matter.
What Happens if the Court Finds an Undue Hardship?
If the Alabama bankruptcy judge decides that the borrower faces an undue hardship with their student loan, the court may decide to do one of the following:
- Fully discharge the loan: This means the borrower doesn’t have to repay any amount of the student loan and that all collection activity will cease.
- Partially discharge the loan: Alternatively, the court could decide to only discharge some of the debt and make the borrower responsible for the balance.
- Require repayment but with different terms: The court might require the borrower to repay the debt but with different terms such as a lower interest rate.
A borrower who finds no relief from the bankruptcy court can still request a suitable repayment from the lender or loan servicer. The borrower should take action as soon as they know that they cannot repay what is owed.
How an Alabama Bankruptcy Attorney Can Help
Meeting the undue hardship requirement isn’t easy, and the bankruptcy rules have narrowly interpreted the standard to make it difficult to obtain a debt discharge. But that doesn’t mean you are without options. The right law firm can assist with:
- Reviewing and explaining the relevant bankruptcy rules and criteria
- Gathering the evidence you need to prove an undue hardship
- Demonstrating that you have made good faith efforts to repay the debt
- Filing the adversary proceeding action and handling the necessary paperwork
- Litigating your case in court and arguing for the most advantageous outcome
A Practical Approach to Your Debt
Don’t let student loan debt overwhelm you. If you find yourself unable to make payments to your lender or loan servicer, it’s time to explore your options with Pleasant Legal Solutions. Contact us today to review your situation and develop a personalized plan for handling your student loans.