For many, continuing higher education is a goal. However, the cost of college can be expensive for many, leading them to take out loans to help pay for their education. As such, millions of Americans have student loan debt they are responsible for, which can be hard to handle for many in conjunction with other bills and expenses. Many are unsure if filing for bankruptcy is a viable option to discharge these debts. If you want to learn whether or not you can pursue bankruptcy for student loans, the following blog explores what you must know and why connecting with a Memphis, TN student loan debt lawyer for further guidance in these matters.
How Does Bankruptcy Work?
For those in overwhelming debt, bankruptcy can help offer invaluable financial relief. Generally, when you file for bankruptcy, you will file under one of two chapters – Chapter 7 or Chapter 13. Chapter 7 requires the filer to pass a means test, which essentially determines whether or not they make less than the median income of others in Tennessee. If they qualify, Chapter 7 lasts around 6 months and includes the liquidation of assets to repay creditors before discharging the remaining eligible debts.
Those that don’t qualify for Chapter 7 can pursue Chapter 13, which reorganizes your debts into a three to five-year repayment plan. At the end of the plan, any remaining debts will be forgiven.
Is Student Loan Debt Eligible for Discharge?
In years past, student debt has not been included in bankruptcy filings, as it was considered a non-dischargeable debt. However, this has changed in recent years, with some borrowers able to include this in their filing.
To qualify for student debt forgiveness through bankruptcy, you must be able to show that having this debt creates undue hardship for you. In order to qualify, the following must be true:
- You cannot maintain a minimal standard of living for yourself and any dependents
- These hardships will continue through the duration of your payments
- You have made an active effort to repay the loans
A minimal standard of living has many interpretations but commonly includes caring for a child with a serious disability, relying solely on disability checks for income, and requiring public assistance for help with children.
It’s important to consider that even if you do not qualify for forgiveness during bankruptcy, the process can eliminate other debts, making it easier for you to allocate funds to your student loans.
If you are unsure if bankruptcy can help you experience relief for your student loan debt, the team at the Arnold Law Firm can help. We understand how complicated these matters can be which is why we will help you explore all of your legal options during these matters. Connect with our team today to learn how we can guide you through these challenging times.
