Student loan debt is one of the toughest types of debt to have forgiven in bankruptcy. Typical Chapter 7 or Chapter 13 bankruptcies are powerless to discharge student loan debt. There are forgiveness options available through the federal government loan providers, but they are extremely rare and difficult to obtain. There is one exception which may allow for your student loan debt to be discharged in bankruptcy, known as the “undue hardship” exception. If you can prove this exception to the court, your student loan debt will be a thing of the past after your bankruptcy.
Undue Hardship Exception
According to a St. Petersburg bankruptcy attorney, undue hardship is a clause in the student loan debt law which says that if repaying your loans would cause undue hardship to you and your family, the loans can be forgiven. Sounds simple, but in practice proving “undue hardship” can be very difficult and subject to varying interpretations of the phrase. In general, the bankruptcy attorney says, there are three factors involved in determining undue hardship: poverty, persistence, and good faith.
Poverty means that you are financially unable to make payments while keeping a minimal standard of living; making the payments would keep food from your children, for example. Persistence is a nebulous term that revolves around your inability to improve your financial situation; basically, if it seems likely that you will remain in poverty for the foreseeable future, you meet this criterion. Good faith means that despite these factors you have made reasonable attempts to repay your student loan debt.
Obtaining forgiveness for student loan debt through the undue hardship exception is no easy feat, but may be worth exploring if you believe you meet the criteria.