When you file for Chapter 7 bankruptcy, there are several forms of debt that you can discharge such as credit card debts. However, there are other debts, such as student loans, that you can only discharge under certain circumstances. To be able to discharge your student loans, you'll need to file for Chapter 7 in a strategic way.
Chapter 7 Requirements
You must list all of your debts when filing for Chapter 7 including your student loans. If you do not include all of your debts, you may not be able to discharge any of your debts and your bankruptcy might be converted into a Chapter 13.
To be able to discharge student loan debts, you must show that the loan would impose undue hardship if you were required to pay it off. To meet the undue hardship standard, you must be unable to pay now and in the future. You must finally show that you were making an effort to pay off your loan.
Fortunately, if you haven't taken the appropriate steps already, you can start to take them now. You may contact the creditor so that you can begin to make payments. Then, when enough time passes, you should speak with a bankruptcy lawyer about whether you should seek to discharge your student loan debts.
However, one of the challenges is that student loan payments can often be very low, especially when you have a loan repayment program, and you may have a difficult time arguing that your hardship is so severe that you cannot make your payments. However, it is still possible to do so depending on your financial circumstances.
It's Not Automatic
You will not automatically discharge your student loan debts when you file for bankruptcy. You will need to first file a lawsuit at any point after filing for Chapter 7 bankruptcy. However, if all of your bankruptcy debts have already been discharged, you may need to file a motion to reopen your case. The motion to reopen your Chapter 7 bankruptcy simply continues your case so you can now attach the student loan discharge to it.
When to Delay Bankruptcy
The challenge with delaying bankruptcy is that you may have other financial pressures, such as immediate credit concerns, that must also be factored in. Therefore, you'll need to speak to a bankruptcy attorney about the pros and cons of filing for bankruptcy.
If you have additional questions, reach out to a local bankruptcy lawyer.