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Filing for bankruptcy and what you should know about student loans

If you’re reading this you’re probably considering applying for bankruptcy or going through it. While this is a difficult time, it’s necessary to know all of the details. Some things cannot be discharged under bankruptcy, including some domestic support obligations, some income tax payments and some wrongful death suits. However, sometimes student loan debt can be discharged. Here are some things you should know about student loan debt and bankruptcy.

It’s likely your student loan debt will not be discharged after filing for bankruptcy

Many debtors will not be able to erase student loan debt in Chapter 7 Bankruptcy. With student loan debt growing each year, it’s the second highest consumer debt category. Nationally, 44 million borrowers owe the United States 1.5 trillion in student debt. Some experts say this is because of concern that students may take advantage of the bankruptcy law. While it’s difficult to get rid of student debt in bankruptcy, there are a few ways to get student debt discharged with a bankruptcy attorney in New Hampshire.

If you can prove that paying student loan debt would cause you undue hardship, you may get an exception

Proving the debt would cause undue hardship varies. Some courts have discharged all debt upon proof of hardship, others have discharged partial debt. While often difficult to prove, a low income may help you qualify. There are two tests the courts use: The Brunner Test and the Totality of the Circumstances Test.

Here’s how the Brunner Test works:

This is the test that most courts will use. Under this standard, there are three factors that must be met to ultimately get student loan debt erased in bankruptcy:

  • Poverty– with your expenses and income considered, it is deemed that upon paying your student loan debt you will not be able to maintain a minimal standard of living.
  • Continuing Circumstances– the current financial situation is likely to persist for a large part of the repayment period.
  • Good Faith– there has been a good faith effort made in repayment of student loans.

Here’s how the Totality of Circumstances Method Works:

While less common, this standard is sometimes used in court. Simply put, the court will look at all qualifying factors to determine whether repayment will create undue hardship.

So, how do you go about getting your student loan debt discharged in Bankruptcy?

In order to get a student debt discharged, you must file for an adversary proceeding (a lawsuit within bankruptcy court) which will determine the overall nature of you debt. Then, you’ll present evidentiary support to the court to prove that repayment of student loans would cause undue hardship. Having a bankruptcy lawyer during this is advisable.

Determining Defenses to Payment

If you attended certain educational institutions, you may be more likely to get your student loan debt discharged. If you attended a vocational or trade school, you may have defenses to payment. Some examples that you may have this defense involve breach of contract, unfair or deceptive business practices or fraud by the institution. If you fall into this category, you won’t owe the student debt at all, making the dischargeability issue moot.

Get in touch with Seufert Law Bankruptcy Attorneys to help with your Chapter 7 Bankruptcy Case

You’ll find the Brunner test or other standards applied to Chapter 7 debtors in lots of court cases, which means having a knowledgeable bankruptcy attorney will help you know how to navigate the bankruptcy standards.

If you have a significant amount of student loan debt in question, it might be worthwhile to consult with a New Hampshire bankruptcy attorney at Seufert Law. It’s likely that upon deciding to litigate either the dischargeability issue or assert a defense to the loan repayment in bankruptcy court, you’ll need an New Hampshire attorney to stand by your side in the process. Call our skilled bankruptcy attorneys today to find out about your specific bankruptcy case.

For more information and a free consultation with one of our attorneys, contact Seufert Law Offices, P.A. by calling (603) 934-9837 today.

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