Generally, most student loans are not dischargeable, but there are some exceptions.
- First, government guaranteed student loans will not be discharged in most circumstances.
- Second, loans from tax-exempt educational institutions, such as major colleges and universities are not dischargeable.
- Third, loans made with private lenders, such as banks and loan Companies are non-dischargeable in general.
The types of loans listed above are not generally dischargeable unless you, as the borrower, can prove that it would cause a 'hardship' for you to repay your student loans, or if you did not derive an educational benefit from the education. "Hardship" is defined as the inability to make future payments on the student loan(s) based on your financial condition, including your prospects for future income. It is difficult to obtain a hardship discharge of student loans. The Court considers several factors, including:
- The type of income you have at present (wages, disability, Social Security, etc.);
- The dollar amount of your present income;
- Your potential for future income-the Court will take into consideration the degree(s), if any, that you have and your employability based on your education;
- Your physical or mental condition as each affects your ability to earn wages in the future-your age may be a factor in this regard.
Your student loans may also be dischargeable if you can prove that you derived no "educational benefit" from the courses you completed. This is a defense typically available when courses are taken at business colleges and trade schools that do not provide educational services that are helpful or relevant in obtaining and/or maintaining employment.
It is necessary to file a separate proceeding in the Bankruptcy Court in order to challenge the discharge ability of student loan debt. An attorney who is proficient in Bankruptcy matters will be able to file the necessary documents for you.
If the student loan was obtained as a result of fraud on the part of the lender, it may be discharged because the Original Contract is void or voidable. You should consult with an attorney if you believe that fraud has been committed against you.
