Bank finance articles and tips

Before you make the decision to file personal bankruptcy, you need to realize that certain kinds of debt obligations will not be easy to get rid of. These include criminal fines, child support and alimony, and (in many cases) federal income taxes. Unfortunately, student loans also fall into this category.

It is very difficult to get rid of student loans even if you file bankruptcy. Congress designed the laws in such a way as to encourage banks to make loans to students, and this means that the law has made it difficult to discharge student loans. First of all, what happens if you simply stop making your student loan payments for any reason?

Obviously, the first problem (if you are still a student in college or graduate school), will be that you will have difficulty obtaining future financial aid. You may face lawsuits, but even without a lawsuit the bank may be able to use wage garnishment (up to 15% of your personal income). You may also be forced to pay additional fees in the form of collection costs because of the inconvenience you caused the bank.

So is it impossible to have student loans discharged when you file Chapter 7 bankruptcy? No, it's not impossible, but it is very difficult to persuade a bankruptcy judge to wipe out these debts. You have to prove that you are facing an unusual hardship, a greater financial hardship than most other people filing for bankruptcy!

In addition to proving your hardship, you need to demonstrate your situation is unlikely to improve in the near future. You also have to demonstrate that you have acted in good faith, which means that you have made reasonable efforts to pay back your student loans. You can't declare bankruptcy simply to get rid of your student loans by themselves, so you need to have other financial obligations that have also contributed to your situation.

Ultimately, the bankruptcy judge will have a lot to say when it comes to determining the outcome of the case. This part of the statute is open to interpretation, and the judge will have to look into your situation and make up his own mind.

The judge wants to see that you have tried alternatives to bankruptcy wherever possible, and your personal income and expenses will be examined closely to determine whether you are facing undue hardship. Also remember that it's not just about your current income. If the judge believes that your circumstances could improve in the near future, then your student loan obligations aren't going anywhere.

You can receive a free case review from a Bankruptcy Attorney at our website. To learn more about the benefits of filing bankruptcy visit us at http://freebankruptcyevaluation.org

By Joshua Cardozo
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