If you went to college and ended up with significant loans, you may be disappointed to know that you can’t usually discharge those loans in a bankruptcy. U.S bankruptcy law makes it harder to discharge these, but you may be able to if you take the extra step known as filing an adversary proceeding.
Usually, a judge will refuse your requests for help with student loans unless you’ve already exhausted all other options. You may also need to show that you are facing significant hardship as a result of these loans.
What do you have to do if you want to try to have your loans removed through bankruptcy?
To start with, you need to file either Chapter 7 or 13 bankruptcy. Then, you need to file an adversary proceeding, or AP. The AP has to be filed before anyone would consider discharging your student loans.
Prior to going to court, you will need to meet with your trustee and creditors to confirm your debts. You will have to go through credit counseling and file extensive paperwork. That’s why most people work closely with their attorneys throughout the entire process.
What does the adversary proceeding do for you?
In an adversary proceeding, you’re asking the court to determine if a debt can be discharged. This is essentially your way of filing a lawsuit, or complaint, that you believe that this debt should be discharged. You will need to include details, such as how you are dealing with an unreasonable hardship as a result of the student loans.
What is undue hardship?
Undue hardship is a hardship that makes it difficult or impossible to repay what you owe. There are no specific conditions that constitute undue hardship, so you will need to do your best to prove that you have attempted to repay your debt in good faith but cannot now, and likely will not be able to in the future, based on your current financial situation. Some common undue hardship claims might include having a debilitating mental or physical illness, being on disability as an only source of income or depending on public assistance.
These are all factors to consider if you want to file for bankruptcy to dismiss your loans. It’s difficult, but it is not always impossible.