Are Your Student Loans Discharged when You File for Bankruptcy?

For many families and individuals in Oregon, bankruptcy is seen as a relief from immense pressure and a way to get a fresh financial start. The weight of smothering debt and constant contact from creditors can become overwhelming and bankruptcy allows you to start over with a fresh perspective.

Students and graduates in today’s world carry an excessive amount of debt. According to the Student Loan Borrower Assistance, it is not impossible but extremely difficult to have student loans discharged in bankruptcy. This topic is commonly brought up by politicians and lawmakers on the national stage as many graduates are unable to find work and a salary that match the debt they have from going to school.

To have student loans discharged during bankruptcy, you must prove that paying the debt poses and undue hardship on you and your family or dependents. Courts use several tests to determine if this is true. One of those is the Brunner test, which requires you prove the following:

  • You cannot maintain a minimal standard of living for you and your dependents with your current expenses and income if you are repaying the debt.

  • There are additional circumstances that show these issues will continue throughout the repayment period.

  • You have made good faith efforts to pay down your student loans.

If you can prove that your student loans are providing an undue hardship, they can be completely cancelled. When you file for bankruptcy, you are also protected from creditors attempting to collect on any of your dates until your case is resolved. The creditor must get permission from the court to contact you and start collecting on your date once your case is in the bankruptcy process.

This information is for educational purposes and should not be interpreted as legal advice.