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Can You File Bankruptcy on Student Loans?

Student Loans
by Hailey Young
January 12, 2023
4 min read
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Did you know you can file for bankruptcy on student loans? It’s a different story to get your federal and private loans discharged, but filing for bankruptcy is possible. If planning to discharge your loans, you'll need to do more than just file for bankruptcy. Your loans can only be discharged once you file for Chapter 7 or Chapter 13 bankruptcy and prove to a bankruptcy court that repaying your student loans would cause you and your dependents undue hardship.

To prove undue hardship for student loans, you must file for an "adversary proceeding,” similar to a lawsuit. Your loan servicer may be present at the proceeding to argue against the student loan bankruptcy discharge.

Private and federal student loan borrowers must provide evidence that undue hardship will continue throughout a significant portion of the loan repayment period and that they have made an effort to repay the loan before filing bankruptcy. At Bold.org, we help students eliminate student loan debt. You can make more informed financial decisions by understanding everything you need about student loan debt.

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How much do you have to be in debt to file Chapter 7?

No amount of debt is required to file for either Chapter 7 or Chapter 13 bankruptcy. A Chapter 7 bankruptcy can relieve you of your dischargeable debts if you qualify and meet all the requirements. You may file today only if you have not filed a Chapter 7 bankruptcy within the last eight years.

You should consider your financial situation and time capacity before filing bankruptcy and an adversary proceeding. The process can be costly and time-consuming.

Consider consolidating your student loans to make the payment plan more manageable.

Why are student loans exempt from bankruptcy?

Prior to 1976, all educational debt was discharged after bankruptcy, but in 1976, the laws began to change to make government loans non-dischargeable.

In 1998, student loan debt became non-dischargeable in bankruptcy except in cases of undue hardship. The U.S. government made this change to stop students from taking out large student loans and then declaring bankruptcy to get out of paying them.

Student loans are exempt from bankruptcy, so what happens if you don't pay student loans?

Can student loans be forgiven after ten years?

In the United States, student debt is not automatically forgiven after ten years. If you are employed in the public service industry, you may qualify for the Public Service Loan Forgiveness (PSLF) program. Under this federal program, eligible borrowers can have their loans discharged after ten years if they meet eligibility requirements.

After 20 years, the remaining balance of your undergraduate federal student loan debt can be forgiven if you have an income-driven repayment plan. The balance can be forgiven under an income-driven repayment plan after 25 years for graduate federal loans.

You can look at the article "Is Student Loan Forgiveness Real?" on Bold.org for more information about student loan forgiveness.

Frequently asked questions about filing bankruptcy on student loans

Can I file bankruptcy on private student loans?

You can file bankruptcy on private student loans, but when you file student loan bankruptcy, it does not necessarily mean that you can get your loans discharged. To discharge private student loan debt, you still have to go through an adversary proceeding as you do with federal student loans.

To help you pay for your student loans, check out these grants to pay off student loans exclusive to Bold.org!

What is the downside of filing for bankruptcy?

Depending on factors like the type of bankruptcy you qualify for and your income, you may lose your home, car, and other valuable items. You could be evicted if you rent your home and are behind on your payments. If you own a business and the trustee in your case determines it has value, you could be forced to sell it.

Depending on the credit score you have before filing, you could see a significant drop in your score. Your bankruptcy will also remain on your credit report for up to ten years after the discharge date. There are a variety of other consequences that can come with filing bankruptcy, so make sure that you do research and take time before you decide to move forward.

If you are worried about filing for bankruptcy, you can always consider other options like repayment plans, scholarships, and grants. On Bold.org, scholarships are available to college graduates to help with student loan debt.

Check out how to graduate college debt free to avoid filing for bankruptcy!

Hailey Young

About Hailey

Hailey is adept at writing about financial aid and scholarships. Hailey has spent the majority of her high school and college career crafting her writing skills. In high school, Hailey’s writing experience included writing for her school’s yearbook as well as writing some articles for Redefy, an international non-profit whose goals are to fight stereotypes and promote positive perspectives. Hailey began studying Literary Arts and Africana Studies at Brown University after high school. In her studies, she has taken a variety of writing workshops that have helped her hone her craft as a writer. She will earn her bachelor's degree, which includes an honors degree in Creative Writing from Brown. 

Hailey is also passionate about scholarships and financial aid, as she was a scholarship recipient through high school and college. Through the generosity of others, Hailey has been able to receive a quality education and would love to pass this gift on to others. As a current senior in college, Hailey has become well-versed in the ins and outs of scholarships, student debt, and college spending. With this experience and knowledge, she is readily prepared to help others as a Content Writer for Bold.org. 

Hailey is no longer with the Bold.org Writing Team, but we continue to value and appreciate her contributions.

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