For many people, filing for personal bankruptcy can serve as a financial fresh start. It can be a real relief to know that by filing for Chapter 7 or Chapter 13 bankruptcy, the worries that might develop from worrying about large amounts of credit card debt or about losing the family home can be put to bed.
While it is true that most varieties of debt can be eliminated by filing for bankruptcy, there are some debts that people may still be responsible for, even after bankruptcy. Among these are student loans. As we have discussed on our blog in the past, student loans can be a big part of a person’s financial burden these days — particularly when people emerge from college with tens of thousands of dollars of student loan debt.
Over time, having student loan debt eliminated after bankruptcy has been very difficult because borrowers essentially have to prove that they are in an extremely pinched financial situation — one that will leave them essentially destitute for the term of their student loan.
Despite these standards, it is not impossible. One study conducted a couple of years ago estimated that about 40 percent of people who filed for bankruptcy had a decent chance to have at least some of their financial loan burden lessened.
However, this process is not a simple one. People who have filed for bankruptcy might benefit from additional legal advice when they are attempting to do this in order to have a fighting chance for success.
Source: Bloomberg Businessweek, “You Can Get Student Loans Forgiven in Bankruptcy, but It’s Far From Easy,” Patrick Clark, May 6, 2014