bankruptcy student loan debt
What Chapter of bankruptcy will give me a debt-free fresh start, including my now defaulted student loan?
NEWLY DIVORCED, I TRIED TO START OVER BY BUILDING MY CREDIT,I NEED A TRUE FRESH START, PLEASE TELL ME THE CHAPTER OF BANKRUPTCY TO FILE AND CAN I INCLUDE A STUDENT LOAN IN THE BANKRUPTCY?
You are not going to like my answer…
Chapter 7 involves the selling of assets with the proceeds being distributed to the creditors
Chapter 13 involves a reorganization of debts with repayment over a period of time
Chapter 7 is the way you want to as some unsecured debt can be discharged. But student loans are typically exempt from discharge.
Also, the laws were changed in ‘98 regarding student loans. It’s a lot more dificult to have them discharged.
Discharging student loans in bankruptcy is very difficult to do. Provisions for discharging student loans in bankruptcy were changed in 1998. The bankruptcy court has to rule that repayment would cause undue hardship for you or your dependents.
The court uses a three-pronged test to determine hardship:
If you were forced to repay the loan, you would not be able to maintain a minimal standard of living.
There is evidence that this hardship will continue for a significant portion of the loan repayment period.
You made good-faith efforts to repay the loan before filing bankruptcy (usually this means you have been in repayment for a minimum of five years).
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