Bankruptcy expert Leon Bayer answers real-life questions.
I filed a bankruptcy seven or eight years ago. I asked my lawyer to include my student loan in the bankruptcy. However, my lawyer wouldn’t even try to see if we could get it discharged in the bankruptcy. Is it too late to try now?
You can imagine my frustration that I’ve been paying on this loan and will be continuing to pay on this loan until 2023.
Student loans are usually not dischargeable in bankruptcy. However, there are limited circumstances where student loans may be discharged. If you think you qualify for a discharge, you can reopen your bankruptcy case to litigate the issue.
The Undue Hardship Standard
To seek a bankruptcy discharge of a student loan, the borrower must file a lawsuit in bankruptcy court against the lender. The borrower must prove in trial that repayment will impose an undue hardship on the debtor or any dependent of the debtor. These can be hard cases for a borrower to win.
In California, bankruptcy courts require a finding that the debtor has proven each of the following three elements of undue hardship:
- the debtor cannot maintain, based upon current income and expenses, a “minimal” standard of living for himself or herself and his dependents if compelled to repay the student loans
- additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans, and
- the debtor has made good faith efforts to repay the student loans.
Most borrowers who succeed in discharging student loans are able to do so because they have a severe total permanent disability, either physical or mental. Most of the cases I have handled involved a mental disability, such as permanent disabling depression and anxiety disorders.
(To learn more, see Nolo’s article Student Loan Debt in Bankruptcy.)
Getting Help From an Attorney
The process of such court litigation is extremely difficult. Most debtors will not have the skills to do this on their own. It can also be very expensive if done through an attorney.
Unfortunately, those people who might qualify for the undue hardship discharge are unlikely to have the money to pay a lawyer. If such a borrower can afford a lawyer, that very fact may negate the claim that it will impose an undue hardship. In most cases that I’ve handled, the attorney fees were paid by a family member who wanted to help.
Reopening Your Bankruptcy Case
It is possible to reopen your bankruptcy case for the purpose of seeking a hardship discharge of your student loan. If you feel that you may qualify for a hardship discharge, consult a lawyer with experience.
Other Ways to Get Relief From Student Loans
Lastly, I want to point out that borrowers who have a total permanent disability may qualify to receive forgiveness of student loans that are guaranteed by or partly funded by a government entity or a nonprofit institution. If so, this can be done without a bankruptcy. Such lenders have established a comparatively easy procedure to apply for such forgiveness. Details can be obtained directly from your lender.
Even if you don’t have a permanent disability, there are many government repayment programs that can help you lower payments or get a forbearance. To learn more, check out Nolo’s Student Loan area.
Leon Bayer is a Los Angeles bankruptcy attorney. He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy. The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo. By answering a question on this blog, Mr. Bayer does not become your lawyer.