Student Loans are far and away the most difficult form of debt to erase. Bankruptcy filing is typically not an option for student debt unless debtors can clearly prove through a series of tests that:
- loan repayments place undue hardship on the debtor and his/her dependents;
- the debtor, due to extenuating circumstances, will not be able to repay the loan for a considerable length of time, or
- the debtor has made good faith efforts to repay the loan to the best of their ability.
Filing Bankruptcy Can Be a Positive Thing
Generally, due to the negative impact a bankruptcy can have on your credit score and financial and physical assets, it is widely discouraged for those whose major debt is only student loans. However, it is possible to discharge student loans through bankruptcy. For example, if the debtor can prove that he or she has become trapped in a cycle of poverty, attended a fraudulent school or a school that became unaccredited, or that there is no foreseeable end to extended financial difficulty, then courts may approve bankruptcy for student loans. Filing for bankruptcy may also protect the debtor from other outstanding debt as well.
Even if bankruptcy is possible for student debt, it may not be the final solution. In some cases, the debtor may still have to pay back the debt even after bankruptcy has been successfully filed. Alternatives to filing bankruptcy for student loans include: seeking a lower repayment plan, postponing payments through forbearance, applying for deferment or loan forgiveness, and consolidating loans. Even if these steps prove unsuccessful, they may be useful in proving to courts that you have attempted in good faith to repay the student debt.
Anyone considering bankruptcy in Georgia due to student loans should work very carefully with an attorney to be sure of the best course of action. The Athens attorneys at Morgan and Morgan are happy to help walk you through this difficult and often convoluted process to put you back on track for a financially successful future.