Student/School Loans in Bankruptcy
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Olympia, Washington Bankruptcy Attorneys
Will an Olympia, WA bankruptcy wipe out my student loans?
In the overwhelming majority of cases, no. But there are exceptions.
Struggling to pay your student loans and other bills?
Help is available!
Call now to more about your options.
Can I discharge my school or student loans in an Olympia, Washington bankruptcy?
No, in most cases you cannot wipe out your student loans in a WA State bankruptcy.
In General: Generally, student loans are not dischargeable in bankruptcy. Student loans under the new bankruptcy laws have also been expanded to include tuition and private loans, as well as government loans.
But there are exceptions to the general rule of school loans not being dischargeable in Washington state bankruptcy.
The Student Loan Hardship Discharge: In certain rare sets of circumstances, student loans can be partially or completely discharged in a bankruptcy. This is typically referred to as a “Hardship Discharge”.
To discharge student loans, you must first qualify to file a bankruptcy. Then, inside the bankruptcy, a separate lawsuit must be filed against the student loan lender(s). Since it is often the government, it is almost certain that they will respond, and the matter will be set for trial.
At trial, you must prove three critical elements. This three-pronged test was detailed in the 9th Circuit Court of Appeals decision of In re Pena, 155 F.3d 1108 (9th Cir. 1998), which adopted the ruling in In re Brunner, 46 B.R. 752, 753 (S.D.N.Y. 1985).
Here the three hurdles that you must overcome in order to have your school loans discharged in your Olympia, WA bankruptcy.
1. Based on your current income and expenses, if you are forced to repay your school loans, you cannot maintain a minimal standard of living for yourself and/or your dependents.
2. These circumstances will continue through a significant portion of the loan’s repayment period.
3. You made a good faith efforts to repay the loans. (This can include forbearances and deferments.)
Common situations that can lead to a hardship discharge are a permanent disability or a chronic illness that will prevent you from paying your loans back.
Since student loan discharge often involves a full trial against the US government, it can be fairly expensive. But if there is a great deal of debt, and a good case, then it may well be worth it.
Other reasons a court may render a student loan uncollectable.
If you were a victim of fraud, or your school shut down before you completed your degree, you may not have to pay back those loans.
Another way to deal with student loans.
If you are struggling to pay your student loans, you may want to consider filing a chapter 13 bankruptcy. This will allow you to pay all or part of your student loans back over 3 to 5 years, while paying little or nothing on your other unsecured debts such as credit cards and medical bills.
If you are struggling to pay your bills every month and have crushing student loans as well, we encourage you to call our offices for an initial consultation. One of our experienced Olympia bankruptcy lawyers can review your financial situation in detail and then go over your legal rights and options.