Graduating college with a degree: Priceless
Completing the final draft of a student thesis: Priceless
Spending the next several years paying off student loans: Inconceivable
No matter the major, many people graduate college with astronomical amounts of student loans and search for ways to decrease them. While filing bankruptcy is a possibility, it is a complex process that requires professional knowledge and skill. Fortunately, we can help.
Proving undue hardship
If making payments will make it impossible to maintain a minimal standard of living, the judge can label the student loan as an undue hardship. The judge will need to decide if it is, but one standard is the federal poverty line guidelines. If a family’s income is at or below the federal poverty line, it is easier to demonstrate that making payments toward any debts cause undue hardship and difficulty in meeting basic needs.
When attempting to prove undue hardship, it is also necessary to demonstrate that the situation is likely to continue into the future, rather than being a temporary financial slump.
Demonstrating good faith
The borrower also needs to show that he or she has made good faith efforts to pay student loans when the money was available to do so.
Other considerations
If discharging the other debts will make it possible to have enough disposable income to make student loan payments, the student loans are likely to remain. It is only if after discharging the other debts, these payments would continue to create an undue hardship that it is likely for them to be discharged in the bankruptcy.
Negotiating terms
Filing for bankruptcy is a significant step and one that creditors do not take lightly. Once the bankruptcy petition has been filed, or even before, it is possible for an attorney to contact creditors and ask for a reduction in the monthly payments. Some creditors will choose to lower payments either temporarily or permanently, or even reduce the loan balances in order to prevent that debt from being included in a bankruptcy filing. It is also possible for an attorney to negotiate with the holder of student loans to do the same thing.
In this way, even if the student loans cannot be discharged in bankruptcy, it may be possible for the payment amounts to be reduced to the point where they are affordable.
Having an attorney handle these negotiations is wise because creditors are more inclined to negotiate with attorneys given the alternative of bankruptcy. When borrowers reach out directly, creditors sometimes blow them off and are unwilling to make the best deal possible.
Get help with your student loans
To have your questions answered about bankruptcy or student loans and how to reduce or eliminate them, call our office and schedule an appointment with an experienced attorney.
Note: This is for information only and does not constitute legal advice.