Can student loans be included in your bankruptcy? Yes, everyone you owe must be included in your bankruptcy. The real question is can student loans be discharged in a bankruptcy? The answer is probably not, but maybe. For cases filed after October 7, 1998, Student Loans are dischargeable only if you can prove that having to repay it would impose an "undue hardship" on you .
Cases filed prior to October 17, 2005, if the program under which your student loan is issued, insured, administered is a for-profit, private (non-government) entity, it may be dischargeable. However, if the program itself receives nonprofit funding by participation of nonprofit entities, the loan is not dischargeable in bankruptcy.
Student and educational loans can only be discharged in bankruptcy if the following can be proven at trial.
To obtain a discharge based on undue hardship you must prove all of the following:
1. That you cannot maintain, based on current income and expenses, a 'minimal' standard of living for yourself and your dependents if forced to repay the loans;
2. That additional circumstances exist indicating that this state of financial affairs is likely to persist for a significant portion of the repayment period of the student loans; and,
3. That you made good faith effort to repay the loans.
This does not just include making payments on the loans. It requires doing things over time such as making efforts to increase your income (which includes going back to school to get additional degrees or experience), consolidating loans with the Direct Loan Servicing Center, and other similar efforts.
Courts do have the authority to issue partial discharges of student loans, in cases where the debtor shows the ability to repay some, but not all, of the loans. All three of the above factors must be still be met not matter if it is partial or complete discharge of the student loan debt. It is very difficult to prove all the necessary elements for the student loan hardship discharge and thus it is very rare to discharge student loan debt.
For other alternatives to dealing with Student Loans, including income contingent repayment plans, and non-bankruptcy methods of canceling the debt, see http://studentaid.ed.gov/PORTALSWebApp/students/english/discharges.jsp?tab=repaying#content
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