Bankruptcy may be your option when it comes to alleviating financial pressure and getting a handle on your life again. Whether through a repayment plan or full loan discharging, it is a tool to assist you.
One of the unfortunate realities about bankruptcy is that there are some loans the courts do not deem dischargeable. Student loans often fall under this umbrella. If you have federal student loans, though, there may be options.
Adversary proceedings
According to the Office of Federal Student Aid, discharging federal student loans requires a separate action alongside your bankruptcy called an adversary proceeding. This action entails you proving that you and your dependents are under undue hardships on account of the collections. While the adversary proceedings are separate, you still must declare a Chapter 7 or Chapter 13 bankruptcy to begin the proceedings.
The courts may discharge your federal student loans in full or in part—having you pay on the remaining portion. Other results include paying your loan with different terms like lower interest rates.
Undue hardship
Having proof that your standard of living is below the minimum due to the loans is often the first thing to prove. Showing to the courts that you made good faith efforts to repay the loan, while under said hardship, may help your case.
There are always methods of tackling your student debt. Even if the courts do not discharge your loans, there may be different repayment plans to consider. If you have federal student loans and seek loan forgiveness, it is important to lean on your resources to have a smoother process.
