Discharging any student loan, whether it is federal, state, or private, is very difficult in bankruptcy. Unless you can show extreme hardship such as a disability and that your financial distress is likely to continue throughout your life, discharging student loans is nearly impossible. Both public and private student loans can be discharged in bankruptcy, if you can satisfy all three of the factors set forth in the Brunner Test:
1. Poverty- stricken: If you are forced to repay your student loans, you will not able to maintain a minimal standard of living for yourself and any of your dependents based on your present income and expenses.
2. Perseverance: It is very likely that your current financial situation will continue as long as your potential repayment period.
3. Good faith effort: despite your financial woes, you have made a good faith effort to make payments on your student loans.
If you are filing for bankruptcy and believe you meet this test, you must still bring an “adversary proceeding” to discharge your student loans. Do not assume that the court will automatically discharge your loans, along with your other debts, just by looking at your financial statements and making the determination that you are unable to pay. Your intentions must be communicated to the court and the student loan providers. How you communicate with both parties is by filing a motion with the court, stating the reasons why you believe your loans should be discharged. Remember that meeting the Brunner test is not easy – you will have to cite case law, and be able to show that your financial health is so dire, and it is not going to get better anytime soon.
An additional avenue to consider if you are experiencing extreme hardship in paying your loans, but cannot satisfy the Brunner test, is to try and settle your private student loan debt. The worst thing about private student loans is that they do not provide the income based payment plan as federal loans do. With the right bankruptcy lawyer, you can bring an adversary proceeding and be successful in eliminating as much as half of your student loan debt. Bankruptcy attorneys that handle student loan litigation will be able to evaluate your situation and litigate on your behalf. Take advantage of the fact that most bankruptcy lawyers will meet with you at no charge for the initial consultation.
Another negative with private loans is that the service provider can utilize any collection methods available to it under the laws of your state; unlike the federal government, which has the power to enforce the collection of the debt. This means that the Creditor can file a lawsuit, enter judgments against you and your property, seize your assets, and garnish your wages. It may be smart to negotiate a settlement now based upon you having no assets and presumably none in the future, and come to an agreement that gives the private student provider some amount of the claim over a period of time and yet releases you from the student loan enslavement.
Mishiyeva Law- Bankruptcy Lawyer NYC 80 Wall Street New York, NY 10005 (646) 736-6328 kmbankruptcylawyerny.com