Many California residents have overwhelming student loan debt. It is difficult, but in some cases possible, to alleviate this financial burden by filing for bankruptcy.
Can you file for bankruptcy on student loan debt?
Depending on your financial situation and whether you are able to pass the means test, you can file for Chapter 7 or Chapter 13 bankruptcy when struggling with debt. If you have student loans you are unable to pay back, your situation is considered by the bankruptcy court on the basis of undue hardship. This means that if paying back your student loans would cause significant financial hardship to you and your dependents, you might qualify for bankruptcy to eliminate the debt.
What should you know about student loan bankruptcy?
Sometimes, it’s been said that student loans cannot be discharged through a bankruptcy filing. However, that’s not true. Again, if paying back your loans creates an undue hardship, you can file for bankruptcy to eliminate that debt. At the same time, student loan debt has long been more complex when it comes to eliminating it with bankruptcy.
Under proposed legislation, eliminating student loan debt would be easier for many people. It would help people who have federal student loan debt to alleviate their burdens through a bankruptcy filing and subsequent discharge 10 years after their first payment becomes due.
How should you file?
If you’ve decided to file for bankruptcy to be rid of your student loan debt, you should know whether you will file for Chapter 7 or Chapter 13. The court will choose a trustee to oversee your situation and talk with your creditors. You are also required to have credit counseling before your bankruptcy can go into effect.
If creditors or debt collectors contact you after your debts have been discharged through bankruptcy, you have the right to complain.