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Can you eliminate student loans with bankruptcy?

You took out $100,000 in student loans. At the time, you were a teenager just trying to decide on a career path. You figured you would land a high-paying job with your college degree and then you could easily pay the loans back.

It did not pan out. Your degree isn’t as useful in the real world as you thought it would be, and your job doesn’t pay you enough to make ends meet, let alone pay back the student loans. You’re thinking about declaring bankruptcy. Can your student loans be part of it?

Typically, they cannot. Even if your bankruptcy filing goes through successfully, you still owe that money. Granted, it may become more affordable if you get rid of some of your other debt, but the student loans remain.

There is one way that student loans can be included, and that’s when there is an undue hardship. This means that:

  • Extenuating circumstances mean you face a very real hardship.
  • The circumstances creating that hardship are probably going to keep existing for the entire time that you owe on the loan.
  • You have, in good faith, really tried to pay off your debt. You simply cannot do so and it is out of your hands.

This doesn’t just mean paying off the debt is difficult or means you have less money to spend on things you want. It means you truly cannot pay it, even if you wanted to. There’s nothing you can do.

It is very important to know what types of debt can be discharged in bankruptcy and how the process works. This is especially true with complicated debts like student loans.

Source: Forbes, “Can Student Loans Be Discharged In Bankruptcy?,” Zack Friedman, accessed April 05, 2018

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