Some former college students in Florida might wonder if their student loans can be discharged in bankruptcy. Unfortunately, the rules to qualify for discharging student loans are stringent, and few people are able to do so.
The first step is qualifying for a Chapter 7 bankruptcy. This is income-based according to the median income for the state. A Chapter 7 bankruptcy allows debts to be discharged, unlike a Chapter 13, which involves reorganizing debts. Next, the applicant has to pass something called the Brunner Test. First, the person must prove efforts to pay off the student loans. The applicant also has to show that paying the debt would make it impossible to maintain a reasonable standard of living. Furthermore, they must show that this situation is likely to remain the same for the bulk of the repayment time.
Because courts have a great deal of leeway in determining what constitutes a reasonable standard of living, this condition is rarely met. For people who have federal student loans, there are other options. Loans can sometimes be deferred, or the person could try to get an income-driven repayment plan. Private lenders are not required to offer these options, but they may be willing to negotiate if contacted.
If an applicant has other debts, such as medical or credit card debt, it still may be worth filing for bankruptcy. This could free up enough money to pay off student loan debt. Many people worry that bankruptcy will permanently ruin their credit, but Chapter 7 only remains on credit reports for 10 years. Furthermore, a filer can begin rebuilding their credit within a few years and minimize the effects of the bankruptcy. An attorney may be able to advise a client about options for debt relief and what may be discharged.