Remember the countless times you have heard
“student loans are not forgivable in bankruptcy”? While this might often be the
case, it is not always the case. Some private student loan debts are actually forgivable
in bankruptcy. These student loan debts can be treated just like other types of
unsecured consumer debt during a chapter 13 bankruptcy or a chapter 7
There are three basic scenarios that could
help you determine if your loan might be dischargeable in bankruptcy (and many
more factors that would need to be addressed on a case-by-case basis).
- You didn’t attend a Title IV
school. Private student loans must be
used to attend a Title IV-certified school (schools with federally
approved accreditation) to be considered non-dischargeable educational
loans. If the school you were attending did was not eligible to receive
federal loans, thereby preventing you from taking out federal student loan
debt, then your school was not Title IV-certified and your student loans
may be dischargeable.
- You borrowed more than the
school’s cost of attendance. For
qualified student loan purposes, the most you should have been able to
receive in student loan debt is the school’s cost of attendance. This is
determined by the school – for things such as tuition, fees, room, board
and educational supplies - deducting other financial aid that you may have
received, such as grants and scholarships. If you were permitted to borrow
more than these pre-determined expenses, you may be eligible for student
loan debt relief.
- You weren’t an eligible
student. Qualified educational loans can
only be issued to eligible students. If you borrowed money but didn’t have
at least a half-time schedule or you were not a U.S. citizen, the loan
might not have been a qualified educational loan and student loan debt
litigation should be explored.
If you fall into one of these categories, you
may be able to get private student loans discharged through your chapter 7 or
chapter 13 bankruptcy. If you’ve already gone through bankruptcy and you fall
into one of these categories, exploring student loan debt litigation to remedy
what should have already been discharged is an option.
Keep in mind that this
area of law is still relatively new, so some bankruptcy attorneys may not be
familiar with how to handle your private student loan debts. It is recommended
that you seek out firms that specialize in this kind of niche student loan debt