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How to lower (or eliminate) student loan debt in a bankruptcy

In many cases, student loan debt cannot be erased through Chapter 7 bankruptcy. But this is not set in stone - some circumstances could result in your student debt being lowered or even discharged completely.

If you want to discharge your student loans when you file for bankruptcy, you need to show that your loan payments cause you "undue hardship." Many judges interpret "undue" in a way that exempts student loans from your debt relief, but some filers have gotten their student debts lowered or erased through bankruptcy proceedings.

In fact, due to the belief that student loans are unforgiveable, one study found that 99.9 percent of student loan debtors who file for bankruptcy do not even try to fight for student debt discharge. But of those who do (with help from an experienced attorney), 50 percent have received some form of relief.

Even if your student loans are unforgiveable under bankruptcy law, you may have other options to lower your debt. If your student debt is completely federal, you may qualify for more favorable payment plans, or deferments based on your financial situation. If you went to a school that the federal government finds employs fraudulent practices (such as the recent case of ITT Tech), you may be able to get your federal loans discharged completely.

If your loans are private, your options are very limited. You could try to negotiate your terms with the loan provider, but many will stand firm, no matter the circumstances. In these cases, even permanent disability might not qualify you for student debt relief.

While student debt is often unforgiveable, you may want to consider fighting for some form of student loan relief. Consult with a skilled bankruptcy attorney to discuss your bankruptcy options, and whether student loan relief is worth pursuing.

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