Student Loan Debt in Bankruptcy is a big concern in Wagoner County. One of the questions I get from many of my clients is, “is there anything you can do about my student loan debt?”  Sadly, for the vast majority of student loan debt in bankruptcy, the answer is no. Many years ago, Congress determined that almost all student loans should not be dischargeable in bankruptcy. Unfortunately, this rule applies not only to student loans given out by the government, but also includes a Stafford loan and those that are private or public.  Further, it includes loans made by non-profit organizations if those organizations receive federal funding.

Exception to Student Loan Debt

Of the many bankruptcy myths, things can be an exception is one that’s often touted. There is one, albeit narrow, exception though for student loan debt in bankruptcy.  In 1987, a federal court in New York determined that the rules regarding student loan debt could be grossly unfair to certain individuals.  As a result, the new rule states if a person cannot maintain a minimal standard of living, has circumstances that make it likely that the living situation will not improve in the foreseeable future, and if the person has made efforts to repay the loans, they can receive forgiveness. Further, this set of rules applies almost exclusively to people with disabilities that prevent them from a fulfilling those obligations. If a person is fully and permanently disabled, they have options that include bankruptcy.

How to Apply for the Exception

First, the person will have to establish their disability.  Thus, a ruling from a Social Security court granting disability is a crucial initial step.  You will also need a doctor’s statement and perhaps medical records documenting such. Finally, after gathering these documents, the person can begin the process of getting rid of the loans.

For federal student loans, you first need to apply for forgiveness from the Department of Education. Often, if the person can provide adequate proof of disability, the Department of Education will write off the loans without ever having to go to court.  If the person has private student loans, they can see if their lender has a similar process as well. Failing that, they can ask the bankruptcy court to discharge the loans in the bankruptcy. Additionally, this will require providing a solid argument to the court as to why the loans should be forgiven and proof of disability.  If the court rules in that person’s favor, the loans will discharge.

Have other bankruptcy questions? Visit our Wagoner Attorneys Law Blog here.

Wagoner County Bankruptcy Assistance

For most people, student loan debt is an unfortunate fact of life. If, however, you are disabled, you may have options available to you to have your loans forgiven or discharged. Don’t let the crushing weight of student debt hang over your head for no reason. Our Wagoner Bankruptcy Attorneys have the skills and knowledge to help you through this process. For a free consultation, you can call us at 918-283-7394, or Ask A Legal Question here.