Can you discharge student loan debt in chapter 7 bankruptcy?

Many people are under the notion that bankruptcy does not discharge student loan debt. The bankruptcy law has been revised with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 but many people are unaware of it. Now the debt stricken consumers can discharge their debts by filing bankruptcy, a debt relief option that helps to regain control over their financial situation.

You can consult an attorney if you want to get a bird’s eye view on this matter.

1. You can approach your lenders to find out whether the student loans have been funded privately or federally. Ask your lenders the total amount you owe on each loan. Make sure that you verify which loans are funded privately and which loans are with government funds. Stafford loans and Perkins loans are considered to be federal loans whereas Sallie Mae's Tuition Answer Loan and NextStudent are considered to be private loans.

2. If you have taken out a private student loan then you need to approach your school. Acquire the documentation from the student loan office to know about the qualified higher education expenses as considered by your school for each semester that you attended. The expenses might differ from school to school as some institutions may include other costs such as books, room and board along with the tuition fee. You need to acquire the old and the latest records if your school cannot provide you the whole record. When your attorney evaluates your actual qualified higher education expenses then this information while be required.

3. You can discharge your student loan if your student loan is higher than the total of the qualified higher education expenses. This can be discharged through a process called an "adversary proceeding" under chapter 7 bankruptcy. You will be able to lower a considerable portion of your student loan along with the interest rate if your loan amount is huge.

4. If your student loan is federally funded then you need to provide evidence to the court of your “undue hardship” on you and your family. Your debts can be discharged on the basis of the undue hardship only if the court is convinced with the financial evidence provided by you.