Regardless of whether you are seeking to file a Chapter 7 or Chapter 13 bankruptcy, certain types of debt are not dischargeable in either case. Generally student loans are considered to be in the category of non-dischargeable debt, but there are exceptions. Your Bryan bankruptcy lawyer will review your situation and tell you whether you are a candidate for one of these exceptions.
Non-Dischargeable Debt vs. Dischargeable Debt
Ever since the rules and procedures for bankruptcy were changed extensively in 2005 there has been considerable confusion about who can file and which types of bankruptcy are available. Generally speaking, any money that is owed to a government entity is not dischargeable. A good example of this is federal taxes. It should not come as a surprise that the I.R.S. insists on getting its due. Yet there are circumstances in which you may not even have to pay back-taxes.
When Student Loans Can Be Discharged
While generally speaking a student loan cannot be included in a bankruptcy, if you can show that repaying it would cause an undue hardship on you, you may be able to discharge even such a loan. The challenge for you is to demonstrate that this is true. Each jurisdiction has its own method of proving hardship. The following are two of these:
- The Totality of Circumstances Test takes all relevant factors into account. Your attorney can help you put together a file on evidence that the court will use in your specific case.
- The Brunner Tests uses three standards to determine whether undue hardship would occur. All three of these standards must be met: 1) Poverty. If you are forced to repay the loan, you and your family will be unable to maintain even a minimal standard of living; 2) Persistence. Your financial circumstance is not likely to change; and 3) Good Faith. You have taken steps to repay the loan which reflect a good faith effort.
There are other tests that are used by bankruptcy courts as well. Moreover, while many courts look only at the total debt, others may consider whether you can repay a portion of the student loan.
Work with an Attorney if You Are Filing Bankruptcy
Bankruptcy can become very complicated. You need to make sure that everything is done properly in your bankruptcy, or you may have it thrown out and be forced to start over again. A Bryan bankruptcy lawyer understands bankruptcy procedures thoroughly, and will strive to help you succeed in your bankruptcy. Call Peterson Law Group today at 979-703-7014 or 936-337-4681.