Jeffrey M. Rosenblum, P.C.
A Fresh Start

Student loans a tricky issue in bankruptcy

People in New York who are struggling to pay their student loans sometimes look for a solution by filing for bankruptcy. Student loans, however, represent a special category of debt that may not be easily discharged, although some exceptions exist.

Unlike most credit card debts and medical bills, loans for school need to meet certain standards to be forgiven. Private loans not given by the federal government could be discharged if they have aged past their statute of limitations. Additionally, if they were used to pay tuition at a school that was not accredited, then they could be eligible for bankruptcy relief.

Loans issued by the federal government might be forgiven if the person can show that paying them presents an excessive hardship. Demonstrating the extent of the burden requires an additional step called an adversary proceeding.

In general, a person cannot assume that a bankruptcy will relieve student loan debts. The topic should be investigated thoroughly before taking action. Working with a student loan debt coach is one approach as is consulting with an attorney experienced in bankruptcy law.

People who need to escape the financial burden of excessive debts may want to consider filing for Chapter 7 bankruptcy. One of the benefits of doing so is that in most cases the court will order a temporary halt of all collection activities. However, not everyone is eligible to file. In addition to mandatory credit counseling, Chapter 7 imposes a means test that must be surmounted. An attorney can describe these and other requirements while discussing other forms of debt relief that may be available.

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