Higher education can be very expensive. Taking out student loans for many Americans is unavoidable. As costs for higher education rise, it is not surprising that many students take out loans. According to Forbes, over 50% of students attending a four-year university end up taking out loans and over 90% of these loans are federal loans. After graduation, paying these loans back can be stressful and may be unattainable. Thankfully, bankruptcy helps people to get out of financial trouble. Many people attempt to relieve their student debt by filing for bankruptcy. Before 2021, student loans were not always covered in any type of bankruptcy. Now, there is an opportunity for student debt forgiveness. Read on to find out what you can do about your student debt. 

What Is Bankruptcy?

Bankruptcy is a legal process that creates a financial “do-over” for the individual filing. Bankruptcy can be very helpful in alleviating debt and has been used by millions of people. There are several different types of bankruptcy, Chapter 7, Chapter 11, and Chapter 13. Chapter 7 is best for individuals that are filing for bankruptcy. Chapter 7 may forgive all debt and use assets to pay off creditors. Chapter 11 is best for businesses filing for bankruptcy. Chapter 11 allows corporations or businesses to create a plan to keep their business running and also pay creditors over time. Similar to Chapter 7, Chapter 13 is good for individuals filing for bankruptcy as well. Chapter 13 filers organize a plan to pay off all or some debts in 3-5 years.

Depending on the type of bankruptcy, bankruptcy can help partially or completely discharge most debts. Many debts are eligible for discharge such as credit cards, medical bills, utility bills, and many other kinds of debt. Bankruptcy is a long and complicated process, it is important to contact an attorney before filing. There are many steps that go into filing, and making mistakes could further financial trouble. At Rosenblum Law, we have many attorneys experienced in bankruptcy and can help guide you through the process. 

Are Student Loans Discharged in Bankruptcy?

Typically student debt is not discharged for anyone filing for bankruptcy. If you were to file for bankruptcy, most debts may be discharged except for student loans, which would still have to be paid back. Less than 1% of student loans were discharged under bankruptcy. This may not be ideal for someone looking for financial relief but has most of their debt in student loans. Nonetheless, bankruptcy can be freeing to those filing and can help relieve most of other debts. 

Before 2021, there was a way to try and relieve yourself from student loans, but it was difficult. Those with student loan debt would have to prove undue hardship, that the burden of these loans is preventing an adequate standard of living. Most of these applications for loans to be waived would be denied. Unpayable student debt can take a huge toll on mental and physical health since the stress of this debt is overbearing. To add on to the struggle of payment, interest adds even more money to pay. Due to interest, student debt can take decades to pay off. There were very few options available for discharging student debt, but thankfully, the Fresh Start Bankruptcy Act of 2021 was passed to help those with student loan debt. 

The Fresh Start Act of 2021

Before the Fresh Start Act, it was nearly impossible to be relieved of student loan debt. Now, there is an opportunity for discharge of student loans. This act was passed to give those with student loan debt an opportunity to free themselves from excessive amounts of debt. However, there is criteria that needs to be met in order to qualify. Those who have been paying their student debt for 10 years or more and have filed for bankruptcy have the opportunity to have their student loans waived. Those who have private loans and/or have not been paying for 10 years or more have the opportunity to have their loans waived if they can prove undue hardship, that it has had a detrimental effect on standard of living. Those who qualify should take advantage of this opportunity. 

What’s My Next Step?

Once you have decided to file for bankruptcy, call to consult with an attorney. Filing for bankruptcy can be an intimidating process, but with the help of an attorney, it can be quite simple. They will help you choose which type of bankruptcy is best for you, Chapter 7, 11, or 13. Ask your attorney if you qualify for the Fresh Start Act and apply to relieve yourself of student loan debt. At Rosenblum Law, an experienced attorney can help guide you through the bankruptcy process and help you apply for student loan forgiveness. Call Rosenblum Law today!