If you are an individual with significant student loan debt in addition to other types of debt, you might be considering the possibility of bankruptcy but wondering if you could be eligible to have your student loans discharged. There are many myths and misconceptions about personal bankruptcy and student loans, including the frequently cited myth that student loans cannot be discharged through a Chapter 7 or Chapter 13 consumer bankruptcy case. Our Nashville & Cookeville bankruptcy attorneys want to make clear that student loan debt can in select situations be discharged if you file for bankruptcy, but you will need to take additional steps in order to be eligible to have that debt discharged.
“Busting myths” about student loans and bankruptcy is the topic of a recent press release from the Consumer Financial Protection Bureau (CFPB). Our Tennessee bankruptcy lawyers want to discuss the press release and key updates concerning student loans and bankruptcy discharges.
Student Loans Can be Eligible for Discharge in Bankruptcy, and the Process Could Get
Currently, even without any changes to existing bankruptcy law, it is possible to have student loans discharged in a consumer bankruptcy case. However, unlike other forms of unsecured debt like credit card or medical debt, to be eligible to have student loans discharged, the debtor must be able to show an “undue hardship.” In order to prove an undue hardship, you must prove three
● You will not be able to maintain a minimal standard of living if you continue repaying
● Your current financial circumstances are likely to last; and
● You have made a good faith effort to repay your loans.
None of this has changed. However, changes could be coming in the near future concerning the discharge of student loans in personal bankruptcy proceedings. Legislation known as the Fresh Start Through Bankruptcy Act, is currently pending in Congress and has bipartisan support. If that legislation passes, it would allow debtors to discharge certain student loan debt in bankruptcy 10 years after the first payment came due on those loans without the debtor having to pass the undue hardship requirement. Some federal lawmakers have gone further in suggesting changes to U.S. bankruptcy law that could come about in 2022 or later.
Some Creditors are Attempting to Collect Discharged Debt, in Violation of Debtor Rights and U.S. Bankruptcy Law
Beyond the fact that some changes could be coming to U.S. bankruptcy law to make it easier to discharge student loan debt through bankruptcy, it is also important to know that the CFPB has been receiving reports of creditors attempting to collect discharged student loan debt. After debtors have gone through the bankruptcy process and proven an undue hardship to have student loans discharged, they are being contacted by creditors or debt collectors attempting to collect.
As the CFPB press release underscores, these attempts are violations of discharge orders. It is critical for debtors who have had student loan debt discharged to know that student loan companies are not allowed to attempt to collect discharged debts.
Contact Our Tennessee Bankruptcy Lawyers in Nashville and Cookeville
Do you have questions about student loan debt and bankruptcy? One of the experienced bankruptcy attorneys in Tennessee at our firm can speak with you today about your
circumstances. Contact Lefkovitz & Lefkovitz by going online at www.lefkovitz.com, or call us at our Nashville office at 615-256-8300 or at our Cookeville office at 931-528-5297 to learn more about the services we provide in Middle Tennessee.