Question Detail: I graduated from college last year, and have not been able to find a job. My parents have been helping me pay for my student loans, but I can’t pay these loans if I can’t find a job! Can I use bankruptcy to eliminate student loan bills?
Answer: Unfortunately, one of the hardest types of debt to deal with is a student loan. Student loans are not dischargeable in bankruptcy, unless you can convince the judge in a very expensive adversarial procedure (separate but related to your bankruptcy case) that you are entitled to a hardship discharge. It’s not easy and it’s not cheap. Here are the options to deal student loans: 1) Pay it. 2) Look at repayment options; talk to your loan servicer about what options are available that may better fit your temporary financial situation. This could include consolidation, deferment, forbearance, electronic payments (usually reduces your interest rate), scaled payments (payments start low and increase as your income increases), and other options as well. The following link provides more information:http://www.direct.ed.gov/inrepayment.html 3) Seek loan cancellation or forgiveness by public service employment. If you are employed in a ‘public service’ job for a specified number of years, the remaining balance of certain types of student loans may be cancelled or forgiven. 4) Look at loan cancellation or forgiveness for breach of bargain. If your school didn’t hold up its end of the bargain. For example, the school closed its doors before you completed your program or the school forged your name on the loan documents, you may be entitled to relief. 5) Seek an administrative discharge. This is an administrative proceeding (not in bankruptcy court or other civil court) that may allow discharge of your student loan under very strict, certain circumstances, usually having to do with disability. 6) Pursue adversary proceeding in bankruptcy. As mentioned earlier, this is a legal proceeding available through bankruptcy, but is rarely pursued because of the high cost of legal fees and little chance of proving ‘hardship.’ If you went to school to become a ballet dancer but later had both your legs amputated after an accident, you might be able to satisfy the hardship criteria in an adversary proceeding. We once used this example with a client and she responded that ‘hardship’ still may not be satisfied, because, although the dancer has no legs, she still has arms and hands that can be put to work and be productive. Please see the following link for more information on some of these options:http://www.direct.ed.gov/cancellation.htmlHave a question? Craig Swapp & Associates would be happy to answer it. Please submit your bankruptcy question online or call or chat with us. Our Utah bankruptcy attorney can help you understand your options and help bring peace of mind.