Can Filing for Bankruptcy Provide Relief from Student Loans?
Those filing for bankruptcy often have a lot of questions. If you have student loans, you might wonder if bankruptcy can help you clear your financial obligation alongside other outstanding debts.
While bankruptcy is often associated with clearing debts, student loans are notoriously difficult to discharge. However, there are circumstances where it might be possible to discharge student loans through bankruptcy, but you need to understand your options to make informed decisions.
At Rushing Law Firm, PLLC, we understand the stress and difficulty of dealing with student loans and filing for bankruptcy. Our founding attorney, Robert N. Rushing, strives to be your trusted partner by using his years of experience in helping people resolve their bankruptcy cases.
Based in Arkansas, our firm serves clients in El Dorado, Magnolia, Camden, and Crossett as well as throughout Union County, Columbia County, Ashley County, and Ouachita County. Contact us today to see how we can help with your financial situation.
Filing for Bankruptcy
Paying off student loans needs careful consideration, especially when you're dealing with the larger issue of bankruptcy. Some key points you should to consider include:
Evaluate Your Types of Debt
You should understand the nature of your debts before filing for bankruptcy, as not all debts can be discharged. While credit card debt and medical bills are typically included, debts like student loans, alimony, and child support are usually exempt from discharge.
Understand the Different Chapters
Familiarize yourself with various types of bankruptcy, primarily Chapter 7 and Chapter 13. Chapter 7 involves liquidating assets to pay off debts, whereas Chapter 13 allows you to reorganize your debt and create a repayment plan over three to five years.
Consider the Impact on Your Credit
Bankruptcy can significantly impact your credit score and remain on your credit report for up to 10 years. Assess how this might affect your long-term financial plans, including securing loans or mortgages in the future.
Examine Your Assets
Determine what assets you might be required to liquidate. Some property may be exempt, depending on state laws and the specifics of your situation; you must have a clear understanding of what you stand to lose.
Seek Professional Guidance
Filing for bankruptcy is a complicated legal process that needs professional advice. An experienced bankruptcy attorney can help you achieve the best possible outcome.
Understanding Bankruptcy and Student Loans
Bankruptcy is a legal process that helps you manage or eliminate debt. There are two main types of personal bankruptcy for individuals—Chapter 7 and Chapter 13. Chapter 7 bankruptcy involves liquidating assets to pay off creditors, while Chapter 13 bankruptcy allows debtors to create a repayment plan to pay back all or part of their debts over time.
Student loans, however, are generally not dischargeable through bankruptcy due to strict federal regulations. To have them potentially discharged, you must file a separate action called an "adversary proceeding" and prove that repaying the loans would cause undue hardship. This is a complicated legal standard that varies by jurisdiction and requires substantial evidence.
To prove undue hardship, you must demonstrate that you cannot maintain a minimal standard of living while repaying your student loans. You must also show that your financial circumstances are unlikely to improve over time and that you have made good-faith efforts to repay the loans. A knowledgeable bankruptcy attorney can help you explore possible relief options.
Arkansas Laws Governing Bankruptcy and Student Loans
In Arkansas, the Brunner Test is often used to determine if a debtor meets the undue hardship requirement for discharging student loans through bankruptcy. The Brunner Test involves three criteria:
Poverty: The debtor cannot maintain a minimal standard of living for themselves and their dependents if forced to repay the student loans.
Persistence: The financial situation is likely to continue for a significant portion of the repayment period.
Good Faith: The debtor has made efforts to repay the loans prior to filing for bankruptcy.
Meeting these criteria in Arkansas, or elsewhere, can be challenging, but not impossible. Rushing Law Firm, PLLC can examine your financial situation and present a compelling case to the court if it meets the above criteria.
Evidence Requirements
You must provide thorough documentation of your income, expenses, and efforts to pay the student loans. This includes tax returns, pay stubs, and records of payments made.
Limited Precedents
Arkansas courts may look at previous undue hardship rulings, but because these cases are highly specific to individual circumstances, outcomes can vary widely.
Appeals Process
If an undue hardship claim for discharging student loans is denied, the debtor may have the opportunity to appeal the decision, though this requires careful examination of the original ruling and potentially additional evidence.
Bankruptcy Attorney in El Dorado, Arkansas
At Rushing Law Firm, PLLC, we strive to ease the bankruptcy process for you. When you're facing financial challenges, the last thing you need is to be pressured into making unwanted decisions.
Our attorney has extensive experience in handling personal bankruptcy cases for clients in Arkansas, including El Dorado, Magnolia, Camden, and Crossett as well as throughout Union County, Columbia County, Ashley County, and Ouachita County. Reach out to us to explore student loan forgiveness through bankruptcy. Schedule a call today.