Many people ask us if their private student loans can be discharged (eliminated) if they file bankruptcy. This blog will discuss the answer to that question in general terms as everybody’s situation is different. We always recommend that you speak with an experienced NJ bankruptcy attorney about your situation.
What Are the Different Types of Student Loans?
There are basically two types of student loans: government loans and private student loans. Although the general rule is that most student loan debt, whether government or private, is not discharged in bankruptcy, some student loan debt does actually get discharged.
Types of Student Loans That Are Automatically Discharged in Bankruptcy
There are some private student loans that may be automatically discharged in bankruptcy, just like other unsecured consumer debt. The Consumer Financial Protection Bureau provides some examples of student loans that are eligible for a standard bankruptcy discharge which include:
- Loans made to attend schools that are not eligible to receive U.S. federal student aid, such as foreign schools and unaccredited schools (“non-Title IV schools”);
- Loans made to students attending school less than half-time;
- Loans made in excess of the cost to attend school. These are often disbursed directly to the borrower and not to the school;
- Loans made to cover fees and living expenses which were incurred while studying for the bar exam or other professional exams;
- Loans made to cover fees, living expenses, and moving costs associated with a medical or dental residency; and
- Other loans made for non-qualified higher education expenses.
Private Student Loans and Your Bankruptcy Discharge
Oftentimes, private student loan lenders sue people to recover the student loan debt after they receive a bankruptcy discharge. Very often, private student loan lenders bring lawsuits on these debts after the bankruptcy discharge is entered. Those not aware that the above listed types of private student loan debt may have been discharged in bankruptcy do not defend those suits and end up paying debt that they should not have to.
Student Loans That Are Not Automatically Discharged in Bankruptcy
Other private student loans can be discharged under the “undue hardship” standard. This is a very difficult and expensive process which requires that a lawsuit called an adversary proceeding be filed in the Bankruptcy Court. It would be best to discuss this option with an experienced attorney.
If You Have Questions About Your Private Student Loans and Bankruptcy, Contact Us
If you have received a bankruptcy discharge and are being sued for a private student loan, or are considering bankruptcy and want to know if your student loan debt will be discharged, contact the law offices of Levitt & Slafkes, P.C. today.
We are proudly designated as a debt relief agency by an Act of Congress. We have proudly assisted consumers in filing for Bankruptcy Relief for over 30 years. The information on this website and blogs is for general information purposes only. Nothing should be taken as legal advice for any individual case or situation.
Bruce H. Levitt, Esq. is an experienced New Jersey foreclosure defense attorney who has been helping homeowners keep their homes for over 30 years. If you are having trouble paying your mortgage or are being sued in foreclosure contact Bruce Levitt today.