Options for Student Loan Debtors – Part 1: Bankruptcy

Student Loan PaymentsPursuant to 11 USC §523(a)(8), student loans are nondischargeable in bankruptcy unless you can prove the student loans will impose an undue hardship on you and your dependents.

To ask the Court for an Order discharging your liability on these obligations, you must file a lawsuit within your bankruptcy case and the burden of proof is on you to prove undue hardship.

In the 8th Circuit, the Court applies a totality of the circumstances test in determining undue hardship.  The Court will review:

  1. your past, present, and reasonably reliable future financial resources;
  2. your and your dependents reasonably necessary living expenses; and
  3. any other relevant facts and circumstances surrounding your bankruptcy case.

The biggest drawback to attempting to discharge your student loans in bankruptcy is the cost to do so.  If you are considering this option, you should discuss the issue thoroughly with your attorney.

For more information on bankruptcy or debtor-creditor issues, please contact Charles Smith or Nicole Hughes at Telpner Peterson Law Firm, LLP today at (712) 325-9000.

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