Before discharging Student Loan debt in bankruptcy, it is necessary to prove an “undue hardship”. The courts have ruled that “undue hardship” means something more than “garden variety” hardship. Bankruptcy courts across the county apply different formulas when determining whether undue financial hardship exists. In Minnesota, the court uses the “totality of the circumstances” test to determine undue hardship. The court can look at many factors, such whether the debtor has made a good faith effort to make payments on the student loan, whether the debtor could make payments on an income contingent repayment plan (if available), the debtor’s prospects for earning a greater wage in the future, the debtors age and health, family obligations, how much benefit the debtor received from his or her education, and the size of the loan. To find out if your student loan debt qualifies for discharge in bankruptcy, contact your local bankruptcy attorney who is familiar with the undue hardship formulas used in your jurisdiction.
Consolidating your student loan is an option that may be available to you if a discharge in bankruptcy is not able to be obtained. This is beneficial if you are having trouble making your monthly payments, and have used up your forbearances and deferments, or if you want to avoid going into default altogether. In consolidating your student loan, you would be receiving a Direct Consolidation Loan. This is a federal loan made by the U.S. Dept. of Education that would combine one or more federal student loans into one new loan.
You are only eligible to consolidate your loans if you have graduated, left school, or dropped below half-time enrollment. There must be one Direct Loan or Federal Family Education Loan Program loan that is in a grace period or in repayment. Defaulted loans are able to be consolidated, but repayment arrangements must be made before consolidating, or you must agree to repay your new consolidated loan under the Income-Contingent Repayment Plan or the Income-Based Repayment Plan.
Matters surrounding student loan debt are often complex and require the assistance of someone knowledgeable in this field. Contact Minnesota Bankruptcy Attorney Gregory J. Wald for more information pertaining to your specific student loan matter.
Gregory J. Wald, Attorney at Law
1500 Northland Plaza
3800 American Boulevard West
Bloomington, MN 55431
Toll Free: 1-866-747-1130