You may have heard that Chapter 7 bankruptcy cannot be used to get rid of student loans. While that is true for many people, it is not 100 percent accurate in all cases.
While most student loans stand even through bankruptcy, some can get discharged when they result in an undue hardship. It has to go beyond your not wanting to pay or not wanting to sacrifice nonessential items -- like cable TV or a new car -- to make the payments. You need to actually be unable to pay entirely, to the point that it is highly detrimental to you and/or your children.
To demonstrate that you are facing an undue hardship and that you should be allowed to discharge your debt, you need to show that:
- There is absolutely no way for you to make payments right now.
- There is not going to be a way for you to pay in the future. For instance, you are not about to land a high-paying job that will cover the cost.
- In good faith, you did all that you could to pay off the loans and really made an effort.
Timing is important, as well. You have to ask for the hardship discharge and hope that the court grants it. This must be done prior to discharging the rest of the debt you face, such as credit card debt. Make sure you know the proper order of operations to give yourself a chance.
If you are facing a complex bankruptcy issue like this, you need to look into all of your legal options.