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3 Steps to Starting Your Life Anew: Is Declaring Bankruptcy a Way Out of Student Loan Debt?

More than 44.7 million Americans have student loan debt. According to figures from U.S. Federal Reserve and the Federal Reserve Bank of New York, this number rises every year, with more and more people seemingly struggling to repay their loans. In 2018 alone, more than 1.17 million borrowers attempted to certify for Public Service Loan Forgiveness (PSLF), indicating that they were facing payment hardships.

If you belong in this group, filing for bankruptcy could be one way out of that rabbit hole. It’s not as straightforward as a review of Winner casino, or likely as you’d wish. But it’s still an option nonetheless. We’ll show you how to apply shortly. But first, what is bankruptcy?


Bankruptcy is a court proceeding where a judge decides whether or not your debts should be discharged if it’s determined that you might not be in a position to repay them.

The process involves examination of the defaulter’s assets and liabilities and thereafter an issuance of an order to reduce, restructure, or eliminate the debt.

There are two main types of bankruptcy; Chapter 7 and Chapter 13. Both types can, to an extent, help with student loan debt.

Applying for bankruptcy in 3 steps

If applying specifically to have your student loan debt reassessed, you’ll need to follow three steps;

  1. File an adversary proceeding

Bankruptcy cases are different. Some are simple while others are complicated. Simpler or cheap bankruptcy cases are resolved as contested matters. A “contested matter” requires a hearing and decision from the judge and no more.

Adversary proceedings, meanwhile, are a little more complex. Here, the plaintiff files a complaint and the defendant issues a response. Then, discovery is conducted to develop evidence before the case takes off proper. Student loan debt bankruptcy cases mostly take this approach. 

  1. Prove undue hardship

Student loans aren’t typically discharged in bankruptcy, except in rare circumstances where you can prove that paying them would be an undue hardship. This is where you should put most of your effort – prove to the court that repaying that debt is just not possible.

To successfully get through this step, you’ll need to pass the Brunner Test which requires you to meet poverty, persistence, and good faith thresholds. Other courts use other tests such as the Totality of the Circumstances Test and the Health Education Assistance Loans (HEAL) test. 

  1. Fight to the end

In addition to proving undue hardship, there are a couple of steps you can take in an effort to win your bankruptcy case. First off, retain a professional attorney experienced in student loan debt bankruptcy cases. Secondly, find an expert to testify about your inability to be gainfully employed in the future. And finally, raise any defences to payment of the student loan debt. These can include; breach of contract, deceptive business practices, and fraud. If any of these defences succeed, you won’t owe any debt.

What Next?

If your bankruptcy case is successful, your student loan debt will be reduced, restructured, or completely erased. If you’re unsuccessful, though, the debt will remain. However, don’t give up. There are several other solutions to pursue. 


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