Discharging Student Loan Debt in Bankruptcy
Attorneys serving Brandon, Riverview, Hillsborough County and all of Tampa Bay
Federal and Private Student Loans
There are two primary types of student loans: federal and private. Federal student loans, such as Stafford and Perkins loans, are backed by the federal government and if the debtor does not pay, the federal government will have to pay. Private loans do not have the backing of the federal government. Presently, neither of these types of loans can be discharged in either a Chapter 7 or a Chapter 13 bankruptcy subsequent to the enaction of the 2005 Bankruptcy Reform Act without showing an undue hardship, which is difficult to prove. An adversary proceeding would have to be filed against the student loan lender and a trial before the court would be necessary to determine whether undue hardship exists.
In this circuit, the court has adopted the "Brunner test" where the debtor must establish by a preponderance of the evidence the following:
1. The debtor cannot maintain, based on current income and expenses, a "minimal" standard of living for herself and her dependants if forced to repay the loans;
2. additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and
3. the debtor has made good faith efforts to repay the loans.
The judge will hear the testimony and evaluate the evidence as to each of these factors and make a decision in your particular case. So in essence much depends on the judge and the prior findings in the jurisdiction where your case is heard.
For answers to your questions about discharging your student loan debts in bankruptcy, contact us by email or call 813.672.1900 for an initial consultation at no charge.
Chapter 13 Bankruptcy and Student Loans
Although you cannot discharge student loans in a Chapter 13 bankruptcy, you will not pay the full amount of the payment during the length of the plan which can be up to 5 years. The student loan debt will be treated as unsecured debt and it will be included in the total amount to be distributed to unsecured creditors over the life of the plan. How much you will pay unsecured creditors depends on how much disposable monthly income you have remaining after your living expenses and secured debt are deducted from your monthly income. The means test determines your monthly disposable income, which may differ from your evaluation of it. At the end of your plan and after your case has been discharged, you will begin to make regular payments based upon the amount remaining unpaid. You also may file an adversary proceeding to discharge your student loans if your situation has not changed at the end of your Chapter 13 bankruptcy and you believe paying your student loans will cause you undue hardship under the above criteria.
Student Loan Consolidation Plans
There are several student loan consolidation plans for which you may qualify to help you be able to afford to make the payments. For instance, there is an income contingent repayment plan (ICRP) which is calculated based upon your annual gross income and family size. Your payment would be 20 percent of the difference between your gross income and the federal poverty guidelines for your family size and your monthly payment would be between $200.00 to $300.00 unless your income increases. In addition, your debt would be discharged at the end of 25 years.
If you have questions regarding divorce, family law, adoption or bankruptcy, as well as foreclosure defense, contact the law firm of All Family Law Group (Lynette Silon-Laguna, P.A.) We provide a free initial consultation, accept MasterCard, Visa, Discover and American Express, and charge reasonable and competitive rates. Furthermore, to assist you we have a team of legal assistants and associate attorneys, including a Spanish-speaking associate attorney.
Our office is conveniently located in the Riverview/Brandon area on Highway 301 South directly off of Interstate 75, near the intersection of Bloomingdale Avenue. Contact our firm by e-mail or call 813.672.1900 . We will respond at our earliest opportunity!
We serve all of Hillsborough County, including Riverview, Brandon, Gibsonton, Apollo Beach, Valrico, Thonotosassa, Sun City Center, Mango, Plant City, Ruskin, and Wimauma, Florida as well as MacDill Air Force Base.