Navigating bankruptcy is a complex legal process that deserves a significant amount of time and consideration before reaching a resolution. Although it can yield significant benefits for some, bankruptcy involves a unique set of consequences, and should be discussed with a bankruptcy attorney in Florida before making a decision. Depending on the type of bankruptcy, consequences can include lost assets and impacted credit. However, it’s important to remember that bankruptcy only disrupts your life—it doesn’t destroy it.
There are many financial changes that take place during and after filing bankruptcy. Although many people will continue to make their student loan payments, a select few might have the option to discharge them. In fact, only about 0.1 percent of Americans who file for bankruptcy try to discharge their student loans. This is why hiring an attorney for this process is so important.
In this article, we will discuss the best ways to handle student loan debt when filing bankruptcy.
How to Discharge Student Loans in Bankruptcy
In some cases, student loan debt can be discharged by the Court. However, in order for the Court to consider discharge, you must prove that continuing to make student loan payments will worsen your financial situation. Although the process of filing for bankruptcy alone is enough to prove that you are experiencing financial strain, you must also provide evidence that proves “undue hardship”. This “undue hardship” exception includes different tests and analyses as determined by the Court to assess your true financial situation.
- The Brunner Test: This commonly-used test looks at several different factors to determine your eligibility for student loan discharge. The findings of the test will help the Court determine whether some or all of your loans should be discharged. The Brunner Test looks at your current financials, and whether or not you would be able to maintain a minimal standard of living if you repaid the loan in full. The test then considers the permanence of your financial situation, and whether you would struggle for most of the repayment period. Finally, The Brunner Test ensures that you made an honest effort to repay the loans before filing for discharge.
- Totality of Circumstances Test: Other courts might rely on the Totality of Circumstances test. However, this test is less common, and the qualifications are a bit more unclear than The Brunner Test. The courts will examine all of your finances—from resources to living expenses—to determine whether you are eligible for student loan discharge.
Although it is difficult to be granted student loan discharge, it isn’t impossible. Research shows that approximately 40 percent of people who apply for discharge during bankruptcy are successful.
What Outcomes Can I Expect?
After making your case and proving your level of hardship to the Court, there are three potential outcomes for your student loan discharge.
1. No Discharge: Unfortunately, even after going through the process and proving your case, you still may not be granted a discharge ruling. This means that you will still be responsible for the full repayment of your loan, but the courts may consider reducing your interest rates or offering another form of assistance.
2. Partial Discharge: This is the most common type of student loan discharge. This discharges a portion of your student loans and then requires you to assume responsibility for the rest. The amount for which you will be responsible fully depends on your circumstances and the hardship caused by your loans.
3. Full Discharge: A full discharge is the best outcome in an undue hardship case. This means that the Court has decided to fully discharge all of your student loans, and you will be relieved of all repayment responsibility.
Why a Bankruptcy Attorney in Florida is Your Best Option
Not many people have navigated the process of discharging student loans, especially since many think it’s impossible. A bankruptcy attorney in Florida knows how to navigate these types of cases and is your best shot at granting you a student loan discharge. It’s crucial to have insight into how local jurisdictions work in your area, and the best way to file your paperwork to get things started.
The Law Offices of Travis R. Walker take every type of bankruptcy case seriously. We are empathetic to each individual case and passionate about helping you find the best solutions for your situation. If you’re considering student loan discharge as part of your bankruptcy filing in Florida, contact us today to schedule a free consultation to learn more.