Student Loan Debt Proceedings
Myth: You can’t discharge your student loan debts through bankruptcy.
Some individuals are able to discharge their student loan debts by proving the debts would cause “undue hardship.” Unfortunately, doing so is easier said than done. Although student loan debts are not secured by collateral, they are treated differently than other unsecured debts under the Bankruptcy Code. Additionally, the Federal Rules of Bankruptcy Procedure require that all proceedings to determine the dischargeability of student loan debts be brought as adversary proceedings, which are lawsuits filed in (or removed to) the bankruptcy court. When you seek to discharge your student loan debt, you must sue your creditor in bankruptcy court.
In the District of Columbia, individuals may only demonstrate “undue hardship” through a three-part test. Firstly, individuals must prove they cannot maintain a minimal standard of living if forced to repay the loan. Generally, individuals must already be enrolled in an income-driven repayment (IDR) plan to meet this requirement. Secondly, individuals must prove that their financial position will not improve over the course of the repayment period. The hardship must be fairly permanent, as with long-term illnesses, disabilities, or increases in the number of dependents in your household. Thirdly, individuals must demonstrate they made good faith efforts to repay the loan. All three elements must be proven conjunctively and by a preponderance of the evidence before a student loan debt can be discharged.
We offer legal representation in these adversary proceedings in addition to representation in bankruptcy cases. Representation in student loan debt proceedings is available on a 29.9% contingent fee basis, meaning you do not have to pay an additional fee unless a student loan debt is successfully discharged. The contingent fee is calculated based on how much student loan debt is discharged and can be paid over time in monthly installments.
If you would like to learn more about Student Loan Debt Proceedings or would like to speak to an attorney, please contact us to schedule a free Initial Consultation.