As we have previously mentioned, discharging a student loan in bankruptcy can be difficult to say the least. In order to receive a bankruptcy discharge for your student loans, you must be able to prove that repaying the loan would cause an undue hardship. Unfortunately, “undue hardship” has not been specifically defined. This lack of a clear definition has created a situation where two debtors with similar circumstances will experience a different bankruptcy outcome.
Ways to discharge a student loan during your bankruptcy:
- If you are totally or permanently disabled you may be able to discharge your student loan. However, there have been cases where some individuals were disabled and still unable to discharge their student loan because despite their disability they were able to work some type of job. Also, so mental disabilities may not count as a disability that will impact your ability to repay your student loan.
- You are a veteran. If you are a veteran, you may be eligible to totally and permanently discharge your student loan if you can prove that you are unemployable because of a service-connected condition. For example, if you became disabled because of combat injuries, you may be able to discharge your loans. But on the other hand, if you became disable because of a non-service related injury such as an off duty car accident you may not qualify for the discharge.
- If you die, you will not need to repay your student loan. Also, if your parent took out a PLUS student loan on your behalf, in the event of your death they would be released from the obligation to repay the student loan. To receive the discharge the parent/debtor must verify a borrower’s death and send an original certified copy of the death certificate. The copy must be mailed to the U.S. Department of Education because they do not accept fax copies.
If you meet any of the above criteria you may still receive a discharge of your student loans while you are going through the bankruptcy process. To find out more, speak with your lender. Stay tuned for Part II of this series.