In the past, people who could not afford to pay off their student loans were able to file for bankruptcy. However, many people abused student loan bankruptcy, leading the government to make amendments to the law. Today, creditors can practically no longer be prevented from collecting by the debtor’s declaration of student loan bankruptcy. There is one situation wherein the student loan bankruptcy can fully discharge a person’s debt and that is only when the person can show that the loan causes “undue hardship” on his or her family.
You might think that this would be an easy loophole. However, you should know that filing for student loan bankruptcy under “undue hardship” exemption can be quite hard. You might have to get a good bankruptcy lawyer to help you with this. Courts today are extremely reluctant to approve student loan bankruptcy cases.
This is made even harder by the fact that there are certain requirements for people to prove “undue hardship”. For one thing, you need to show that you are physically incapable of working. This means you have to have some sort of disability to keep you from doing the smallest task required to earn your money. Not only that, you have to show that there is practically no hope of you being hired ever in the future.
Besides this, however, there are still things you can do to make student loan bankruptcy laws work for you. You can file a petition under chapter 13 of the bankruptcy law. This way, declaring student loan bankruptcy will ease your burden by allowing you to pay your creditors in small amounts. However, there are certain prerequisites for declaring this type of student loan bankruptcy.
For one thing, you will need to have a stable and disposable income. This means that you have to prove that you have a job you will be able to keep. The job you get should not only be long term, but it should pay enough to let you live and have something leftover. Disposable income means that you need to have some income left over even after you have paid all of your expenses. This is very practical since how else can you pay off your debt? Student loan bankruptcy does not really need to discharge your debts in order to ease your burdens.
During your filing for student loan bankruptcy, you should also look into challenging the balance of the loan. This is because of the fact that student loans often get passed from creditor to creditor. With each creditor, the amount of interest also changes. By challenging the amount involved in the student loan bankruptcy, you might be able to lower the amount that you have to pay significantly.
This can surely ease a great burden that you might have to carry for a few years. This is because filing your student loan bankruptcy will require you to stick to a payment plan which should knock out a huge percentage of your debt. Notice that the plan only requires you to pay for a percentage.
This means that the payment plan does not really account for the whole loan. However, filing for student loan bankruptcy should be able to at least help you develop a habit of paying your debt regularly and on time.
