A lot of people think that bankruptcy can completely solve all their credit problems. After all by filing for bankruptcy, you can easily discharge your debts, and start all over again.
But sadly, this is a misconception. Not everyone can take student loan bankruptcy to retire their debts. The bankruptcy policy reforms impose more stringent criteria on who can be eligible to discharge credit on student loans.
Filing for bankruptcy also takes much time. You need to attend several proceedings in bankruptcy court just to prove that indeed you cannot repay your student loan debt. And this is not a very easy thing to do. Why? Because most courts are becoming more and more reluctant in approving student loans bankruptcy.
To finally clear out wrong notions, allow us to explain the real, hard facts associated with student loan bankruptcy.
Facts about Student Loans Bankruptcy
An individual can only be eligible to discharge student loan debt if the applicant can prove that he/she experiences undue hardship. What does this mean? You can take student loans bankruptcy if you can prove that you belong to any of these criteria:
- you are physically unable to work;
- you have made a conscious effort to repay your debt but it prevented you and your family from maintaining a minimal standard of living
- there is a very small chance for you to find employment within the duration of your loan
Yes, there is a possibility to discharge your student loan debts. That is if you can effectively prove that you are either physically handicapped or that the chances for gainful employment in the future are non-existent.
If you would like to push through with this decision, you will be prompted to file a separate motion in a bankruptcy court. You will be required to prove your hardship before a judge and convince him to approve your claim.
By looking at these criteria and processes, you may now realize that it is extremely tough to get student loan bankruptcy. But there are other ways to eliminate your student loan debts. How?
Options you can Take
Get a student loan consolidation. Student loan debt consolidation is one of the best ways for a graduate to gradually eliminate bad credit. In this program, the student loan debts and other bills or loan repayments will be consolidated or merged into a single amount. Then, you will need to propose a repayment plan to settle your debts. You will inform your creditors about your debt repayment schedule which can take at most five years to completely retire.
But there are also vital requirements in consolidating student loans. You need to have a stable source of income which can provide you disposable funds. You must also meet the minimum credit requirements for both secured and unsecured debts. But still, through a student loan consolidation, you will be able to gradually reduce your outstanding financial obligation. In the end you can be declared totally free from any forms of debt.
Consider other credit management options. Some people use student loan forgiveness programs. In this program, you will be required to perform a voluntary service to the community for a specified number of hours. You may also be encouraged to join the military so you can totally eliminate your debts. Other options include forbearance and deferment during tough times, income-contingent repayment plans and other credit busting methods.
We hope that through the things mentioned in this article you can now answer this question: can my student loans really be discharged when I declare bankruptcy?
About the Author
Samantha Wilson is a consultant for managing credit cards and finding the best student loans. For years she has written student credit card articles that helps build student credit, and student loan help articles that can be used as guides to handle student loan debt.