You can file for student loan bankruptcy b༺y filing an advers♎ary proceeding in a Chapter 7 or Chapter 13 bankruptcy case. The court will evaluate your finances to determine whether repaying student loans would present an “undue hardship.”

Bankruptcy: The Basics

Filing for bankruptcy involves submitting a petition to the 澳洲幸运5官方开奖结果体彩网:bankruptcy court detailing your debt, assets, income, and expenses. You may have to complete credit c𒆙ounseling, pay filing fees, and attend a meeting with your creditors.

To get your student loans discharged in bankruptcy, you'll have to file for either 澳洲幸运5官方开奖结果体彩网:Chapter 7 or 澳洲幸运5官方开奖结果体彩网:Chapter 13 first. After that, you'll file an adversary proceeding to demonstrate that repaying your student loans would cause undue hardship.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is also referred to as liquidation bankruptcy. A trustee is assigned to liquidate your non-exempt assets and use the money to pay off your unsecured debts. Some debts can't be discharg👍ed 🐼in Chapter 7 bankruptcy, including alimony, child support, and most tax debts.

You must have limited income to qualify for Chapter 7 bankruptcy, and you'll be required to complete a credit counseling course within 180 days before filing.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, also known as a wage earner's plan, involves reorganizing all or parts of your debts and creating a plan to repay them within three to five years. This plan allocates a percentage of your 澳洲幸运5官方开奖结果体彩网:disposable incomeꩵ for paying off your debts, which a 🍌trustee collects and then distributes to your creditors.

Chapter 13 is often a good alternative for people whose income is too high for Chapter 7 or who want to avoid 澳洲幸运5官方开奖结果体彩网:foreclosure.

How an Adversary Proceeding Works

An adversary proceeding involves a 15-page form that outlines your financial circumstances and explains how repaying your student debt would qualify as undue hardship. From November 2022 through March 2024, 98% of borrowers who applied using this form received at least a partial discharge.

When to File an Adversary Proceeding

With Chapter 7 bankruptcy, yo𓄧u can initiate the adversary proceeding immediately after you’ve filed your case. Your state may also allow you to file an adversary proceeding on a closed Chapter 7 bankruptcy🍃 case.

With Chapter 13 bankruptcy, you may be allowed to file the adversary proceeding early, depending on your state. However, if you win the adversary proceeding, your student loans will only be discharged once you’ve made all of the payments required by your plan.

Sources: United States Courts and myFICO

How Undue Hardship Is Defined

Student debt is ordinarily exempt from discharge, so you’ll have to prove that repaying them would cause undue hardship. This typically requires you to demonstrate the following:

• Repaying your student loans would prevent you from maintaining a minimal standard of living.
• This period of hardship will persist during a significant portion of the repayment term.
• You've made a good faith effort to repay your debt.

Courts may also review your overall financial situation—such as income, expenses, 澳洲幸运5官方开奖结果体彩网:dependents, and job prospects—to decide whether loan 澳洲幸运5官方开奖结果体彩网:repayment is an unreasonable burden. Additionally, there are certain conditions that your creditors will have to mee𝓀t.

Can Student Loanཧ Creditors Fight a Discharge Petition?

When you file an adversary proceeding, your student loan hཧolder has th🎃e option of opposing your request in court. If your hardship is obvious or it wouldn’t be worth the legal costs, your creditor may decide not to fight your petition.

Wh🔯at to Consider Before Filing🍬 for Student Loan Bankruptcy

Here are a few factors worth bearing in mind before you decide to pursue studen𒅌t loan bankruptcy:

• Weak case for undue hardship: If student loans are your only type of debt, you might have a harder time proving that repayment would represent an undue burden.
• Cost of litigation: Filing for bankruptcy isn’t free, and it might be too expensive if you’re already struggling financially. Filing fees can add up to several hundred dollars, but some of these may be waived under certain circumstances. Then there’s the cost of hiring an attorney, and if you can afford to do that, then the court may question whether you qualify for bankruptcy.
• Type of student debt: Since they have a greater number of benefits and protections that (in theory) make them easier to repay, federal student loans are typically more difficult to get discharged in bankruptcy compared to their private counterparts.
• Interest may continue to accrue: With a Chapter 13 repayment plan, certain types of debt have priority over others, with student loans being considered non-priority debt. As such, your student debt may continue to accrue interest while your payments are exclusively going toward paying off your priority debts.

Bankruptcy Alternatives for Federal Loans

Outside of filing bankruptcy, you may be able to get your federal student loans discharged under the following circumstances:

• You received a fraudulent loan.
• Your school misled you or engaged in other misconduct in violation of certain laws.
• Your school falsely certified your eligibility for a federal student loan.
• Your school didn’t make a required refund to your servicer after you withdrew.
• Your school closed while you were enrolled or soon after you withdrew.
• The borrower or the student for whom a PLUS loan was taken out has passed away.

If you don't qualify for discharge but are still struggling to repay your federal student loans, consider applying for 澳洲幸运5官方开奖结果体彩网:forbearance, deferment, or loan rehabilitation.

The Bottom Line

The changes to the adversary proceeding paperwork simplified the process of🃏 applying for student loan bankruptcy, but it’s still more complex than a standard bankruptcy c꧒ase.

If you can prove that repaying your student debt would put you in dire straits, the court may agree to discharge it. However, bankruptcy can be costly and leaves a lasting impact on your credit report, so it's worth considering other options first to ensure you're making the best financial decision for you.