She owes $83k!

Can Bankruptcy Wipe Out Student Debt?

by Steve Rhode

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Dear Steve,
I filed for bankruptcy and have over 83K in student loan debt. I wanted to try to get them discharged since it has been over ten years since I have taken them out and have not had the means to pay the debt off. Is there a particular form I need to fill out to send to the board of education regarding my student loans? Do I just need to go in depth about the financial challenges I have experienced in a letter?

Dear Inez,
Sadly this is not how the process works. If your student loans were going to be discharged in bankruptcy, then your bankruptcy attorney would need to raise an additional action to deal with them. This is called an Adversary Proceeding. It is a separate lawsuit filed during a bankruptcy case.

Your attorney would need to raise specific issues in that lawsuit that would make your loans eligible for discharge. These issues may be things like the loans create an undue hardship, the loans were illegal, the loans were not protected in the bankruptcy process, your school was not accredited, etc.

Additionally, the Adversary Proceeding process has been successful in negotiating down payments and/or balances for loans that were not eliminated. Overall, the benefit of having your bankruptcy attorney file an Adversary Proceeding can far outweigh the cost of the suit.

The Department of Education is supposed to get more reasonable about approving federal student loans for discharge in bankruptcy. Read Department of Education Serious About Discharging Fraudulent Student Loans.

I have not recently gone back and looked at more recent cases to see if that process is actually being more widely recognized. It was slow to roll out. There are a number of articles and documentation about this subject that can be found here.

There is no form to fill out or submit to get your student loans eliminated following bankruptcy. That's actually a question I've never heard before, but surely a number of people probably believe there is such a form.

Find out if you can benefit from student loan debt help.

If the loans were private loans, you had not made a payment, and the statute of limitations expired on those debts, then you would have a defense if you were sued by a private student loan holder. In that case, the suit would end there.

You would need to talk to your bankruptcy attorney to find out if the statute of limitations has run out. Federal student loans do not expire and do not have a statute of limitations.
Steve Rhode
Get Out of Debt Guy - Twitter, G+, Facebook

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

Reviewed November 2017

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