When discussing a client’s situation in a consult or when answering questions about student loans, I try to provide the quickest and most precise answer without boring people with the complicated details of the law. I tell everyone that I speak with: “You will likely still be paying your student loans after the bankruptcy is done,” and “Student loans are generally not dischargeable.”
Do you have government or private loans?
While these statements are true, a heavy emphasis should be placed on the words, likely and generally. One of the first things to consider when determining whether you are one of the fortunate few who can discharge your student loans is whether the loans were government loans or private loans. If the loans were private loans, you must consider whether the loans were incurred solely to pay qualified higher education expenses. If the loans were private and were used for expenses other than qualified higher education expenses, they are dischargeable. (Warning: I am not advocating obtaining private loans and then using them to buy a Wii in addition to paying for school. This would jeopardize your tax benefits.)
Proving undue hardship
If your student loans were government loans or private loans used solely to pay qualified higher education expenses, the debt is only dischargeable if you can prove that continuing to pay on the student loans would create an “undue hardship.” Proving undue hardship is more complicated than it sounds. In Arizona, consideration for undue hardship is based on three factors: 1) the borrower’s past, current, and projected future income; 2) the borrower’s living expenses; and 3) any other relevant facts and circumstances.
If you are drowning in student loan debt and want to learn more about the possibility of discharging your debt and proving undue hardship, an experienced Arizona bankruptcy attorney can help guide you through the process and better prepare you for a successful post-graduate life. Call (480) 648-8975 today to set up your FREE consultation.