Unfortunately, student loan debt is one of the most challenging types of unsecured debt to discharge when filing for bankruptcy. This is because federal regulations state that it is non-dischargeable unless you can show that you currently face undue hardship. Since this is a federal rule, it applies nationwide, including in Texas. However, recent federal guidelines have made it slightly easier to discharge federal student loan debt than private student loan debt.
Contact a diligent bankruptcy attorney from Allmand Law Firm, PLLC, for more information regarding discharging student loan debt during Fort Worth bankruptcy. We could answer your questions, including those about costs and possible alternatives, and help you through each step of the process.
Federal Versus Private Student Loans
Federal student loans, such as direct or indirect consolidation loans, are held by the United States Department of Education, and there is room for discharge if the debtor can prove undue hardship. Other federal financing, such as the Federal Family Education Loan Program or Perkins, does not qualify for the streamlined process and requires litigation to reach an agreement to discharge the debt.
Private student loan debt is generally not dischargeable without proving undue hardship, and the process is much more challenging than with federal student debt—commonly leading to less favorable outcomes. While some potential reforms are in the early stages, they have not yet been enacted into U.S. law.
A seasoned lawyer from Allmand Law Firm, PLLC could review your Fort Worth bankruptcy case and answer specific questions regarding student loan debt relief.
The Undue Hardship Standard
Most bankruptcy courts in Fort Worth use the Brunner Test to evaluate whether the debtor qualifies for student loan debt relief under undue hardship. Under 11 United States Code § 523, the person seeking relief must prove they meet the requirements of all three prongs of the test.
These include an incurable inability to pay the debt, as well as the fact that making the outstanding student loan payments would prevent the individual and their dependents from maintaining basic living standards, such as paying for housing and food. The debtor must also prove that the current financial hardship is likely to persist throughout all or most of the repayment period. Examples include disabilities or long-term unemployment. Finally, they must show the court that they made reasonable faith efforts and sincerely attempted to repay the debt, such as enrolling in repayment plans or seeking deferment.
What Are the Steps To Take?
Residents in Fort Worth may seek student loan debt discharge in Chapter 7 or Chapter 13 bankruptcy by:
- Initiating an adversary proceeding within the bankruptcy case, challenging the loans labeled as non-dischargeable
- Delivering the complaint to the lender, such as the Department of Education, via a process server
- Submitting the attestation form for federal loans, detailing the debtor’s income, expenses, and inability to pay off the debt now and in the future
- Receiving a review by the Department of Justice, which has the authority to recommend a complete or partial discharge
- Attending a court review and hearing, where the court issues a decision based on the submitted evidence and supporting documentation
If the discharge receives approval, the complete or partial amount is wiped from the individual’s outstanding debt. If denied, the payments may resume post-bankruptcy.
Speak to a Fort Worth Lawyer About Discharging Student Loan Debt During Bankruptcy
Filing for relief of outstanding debt is often frustrating and confusing, especially when it comes to student loans. Rather than facing the process alone, many reach out for help from an experienced attorney.
Contact our team at Allmand Law Firm, PLLC with your questions about discharging student loan debt during Fort Worth bankruptcy. We could review the costs—including filing fees—examine the potential impact on your credit score, and explore any available alternatives.
