Can I Get Rid of my Student Loans in Bankruptcy?

Many people in Arizona find themselves struggling to make ends meet as they are burdened with credit card debt, medical bills, mortgage payments, plus, they have to repay all of their student loans from college.  For the majority of the debt that they have, there is debt relief, however, even if they figure out a way to handle their other debts, they will still be buried under the burden of student loan debt.  It leaves many people in Arizona asking, “Are my student loans dis-chargeable through bankruptcy”?

Under the bankruptcy code, student loans are generally NOT dis-chargeable by filing bankruptcy. This means that if you have student loans and file bankruptcy you will continue to be liable for the full payment of these obligations in most cases.  Unfortunately, student loans are usually not discharged in the case of bankruptcy.  According to Chapter 7 Bankruptcy law the only time a student loan might be discharged is if it would cause the debtor “undue hardships”.  The same basic rule also applies to Chapter 13 Bankruptcy cases.  In short, NO, you can not get rid of your student loans by filing chapter 7 or chapter 13 bankruptcy.

Virtually any other kind of debt; including medical bills, mortgage payments, payday loans, credit cards bills, car loans payments, and even gambling losses, can be discharged in bankruptcy, allowing the “honest but unlucky” a chance to restore their footing through an arduous restructuring overseen by a court.

But under a 2005 law passed by Congress to protect lenders, private student loans fall under the same nearly-impossible-to-clear category as child support payments and criminal fines.  Does this seem fair, not particularly, but it is an effort to keep private student loan lenders protected from students racking up thousands of dollars in student loans and then filing bankruptcy to discharge the debt right after college.

The Federal Reserve Bank of New York estimates 37 million Americans have student loan debt, totaling $870 billion. The average balance is around $23,000.  That seems like a steep amount of debt to service as your first job out of college is usually not that high-of-paying position.  Only 39 percent of student loan holders are paying down balances. An estimated 5.4 million borrowers have at least one student loan account past due.  Despite the high number of late payments and mounting student loan debt, there is currently no federally mandated form of debt relief in place to help those who are struggling with the burden of student loans.

If you have questions or would like more information about discharging your student loans through bankruptcy, filing bankruptcy in Arizona, or may be in need of a low cost bankruptcy attorney.  Please contact our Affordable Bankruptcy Lawyers at the My AZ Lawyers.  We offer low cost bankruptcy assistance in Phoenix, Tucson, Mesa, Glendale, and throughout Arizona.  Call and set up a FREE consultation today.  (480) 833-8000 in the Mesa and Phoenix area, (623) 640-4945 in Glendale and Peoria, Arizona, or (520) 306-8729 in Tucson, Marana, or Oro Valley.  We look forward to assisting you with your student loan and bankruptcy concerns.