Discharging Student Loans in Bankruptcy

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You have probably heard that it is impossible to discharge your student loans in a bankruptcy filing. This is not true – it is difficult, but not impossible. Pursuant to Section 523(a)(8) of the Bankruptcy Code, student loans will not be discharged unless repaying them constitutes an “undue hardship” on the debtor or the dependents of the debtor. Also, it is important to understand that there is not a time limitation for when you must attempt to discharge your student loans. In other words, if your financial situation changes over time, you can still seek to discharge the debt.

The undue hardship standard is strictly applied by the court. There are a variety of definitions out there, but generally undue hardship means that it is not reasonable to expect that you will ever have the ability to repay the student loan. Of course, there is always some amount of undue hardship in repaying a student loan, so usually only severe cases will meet the undue hardship standard.

One bankruptcy case that has provided many student loan borrowers with a glimmer of hope was an appeal before the U.S. 9th Circuit Court of Appeals. The debtor, Michael Hedlund, was allowed to discharge $58,000 of his $85,000 student loan. The reason his case is significant is that Mr. Hedlund was a middle-wage earner, not somebody facing extreme poverty.

If you believe you can meet the undue hardship test to discharge your student loan or you are overwhelmed by a variety of different debts, let us help. We can review all of your finances and help you understand your debt relief options. Call us today to schedule your initial consultation. Our office is located in Melbourne, but we proudly serve individuals and businesses across the State of Florida.


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