Most students who wish to have a flourishing career often end up with huge student debt, irrespective of their job prospects. Unfortunately, in most circumstances, many people end up with either no hob or a job that does not pay well. As a result, paying off the student loan becomes difficult, leading to the individual incurring more debts. Filing for bankruptcy might be a way out if you are struggling with finances. While student loans are nondischargeable, filing for bankruptcy might help reduce the payment or, in exceptional cases, wipe it off completely.
Getting rid of student loans is not easy. You are required to file a lawsuit in bankruptcy court and prove undue hardship to get rid of them. While this may sound easy, proving undue hardship is a difficult task. You must prove that:
- Paying the student loan will hamper you from providing minimal living standards for you and your family.
- Your financial situation is unlikely to change in the future.
Proving any of these points is difficult. This is primarily to provide relief only to the worthy candidates, such as those suffering from a total disability. However, if you meet the criteria, you can request discharge of only some types of student loans and not all of them by directly requesting the U.S. Department of Education.
Reduction of student loan payments
Asking for a reduction in monthly payments if the student loan payment becomes unmanageable is an excellent start. However, if the servicer does not agree, filing for Chapter 13 bankruptcy is another option. Since this bankruptcy chapter involves repayment of dues, you can use your disposable income to pay for your dues. Your repayment plan will be for three or five years, depending on your income. Any remaining student loan balance will have to be paid off after completing the plan. However, it is important to remember that your bankruptcy repayment plan will cover all your debts and not just the student loan debt.