Student Loans & Bankruptcy

Education is expensive these days and student loans are one of the debts that loom over consumers’ heads, forcing them into bad financial situations. As the cost of schooling rises, so does the number of people facing bankruptcy involving student loans.

A bankruptcy lawyer in Surprise can help you deal with bankruptcy filings that include student loan debt. Your lawyer will assist you with developing a chapter 13 repayment plan, or help you file for chapter 7 bankruptcy, depending on your situation.

You should know, however, that including student loans in bankruptcy filings can be difficult. In order to have student loans discharged, you must show that the debt will create an undue hardship.

Including Student Loans if You File for Chapter 7 Bankruptcy

Student loan debt is not automatically discharged if you file for chapter 7 bankruptcy, so in order to get it discharged, you must file a complaint against the student loan creditor with the court.

The most common method for Arizona courts to determine if a borrower has shown undue hardship, is to evaluate the borrower’s position based on three criteria included in the Brunner Test. These criteria include:

  •  Debtors cannot maintain a “minimal standard of living” based upon current income and expenses– if forced to repay the loans
  • Additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loan
  • Debtors have made a good faith effort to repay the loans

If the court does not accept your case for undue hardship, you will remain liable for your student loan debt.

However, if you have a substantial amount of student loan debt, it’s still worthwhile to consult with an attorney to determine the likelihood of your success. Contact a bankruptcy lawyer in Surprise, who has helped others with successful petitions.

A Chapter 13 Repayment Plan for Student Loans

Another option for dealing with student loan debt is a chapter 13 repayment plan. Under the court ordered plan, developed with help from your bankruptcy lawyer, your student loan debt will be included in your plan. This gives you a break from crushing debt; however, when the repayment plan is complete, if you still owe money on your student loans you will have to continue to pay the debt.

During the course of a chapter 13 repayment plan, your creditors are not allowed to try to collect their debts, so you will not have to worry about student loan lenders calling or mailing attempts to collect on the loan.

Your bankruptcy lawyer should look at your student loan debt situationand work with you to find a solution. Whether you end up discharging the debt completely, or simply reduce your required payments for a certain period of time, you will get a break from debt and hopefully create a more manageable situation.


This blog is intended as a general discussion of legal issues and not as a statement of fact, legal advice or a legal opinion. No attorney-client relationship is created by this blog. Do not act or rely upon law-related information in this communication without seeking the advice of an attorney licensed to practice in the relevant area.

This blog article was created by Larry P. Karandreas, Esq., on behalf of the Law Offices of Larry P. Karandreas, P.L.L.C., A Lawyer Who Cares™, which concentrates its practice of law to Chapter 7 and Chapter 13 Bankruptcy, and in Debt Negotiation. If you live in or near Phoenix, Glendale, Scottsdale, Peoria or the Surprise, Arizona area and want legal advice or help – please visit the firm website for more information. 
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