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Bankruptcy Help Student Loans

Student loans are not typically discharged in bankruptcy.  It is hard, but not impossible, to do so if you can prove that payment of the debt will impose an undue hardship on you and your dependents.  Does Bankruptcy Help Student Loans?   If you can successfully show undue hardship, your student loan will be fully canceled.  Filing for bankruptcy also automatically protects you from collection actions on all of your debts, at least until the bankruptcy case is determined or until the creditor gets authorization from the court to start collecting again.

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, privately funded student loans are treated the same way that loans funded and guaranteed by the federal government or nonprofit institutions.   Prior to the new law, if you had a loan from a private-sector lender that was not guaranteed, it could be discharged under chapter 7.   The new law gives these loans the same protection as the guaranteed loans.

Does Bankruptcy Help Student Loans?  If you would like to discharge your student loans under the undue hardship exception, you must file a separate motion with the bankruptcy court and then appear before the judge to explain your hardship.  This is not a simple task, so if your student loans are the main part of your debt, you would be better off not facing the roughness of bankruptcy as courts are extremely hesitant to discharge student loans.  Although your student loan cannot be discharged in bankruptcy, a bankruptcy court may be able to ease a devastating debt burden.  Some courts may discharge a part of your student loans, but this is rare and varies by court.

Individuals may also enter into a repayment agreement with the U.S. Department of Education to resolve defaulted notes.  Bear in mind that the Education Department has the right to collect student debts by offset from Federal and state tax refunds and up to 15% of a federal employee’s disposable pay, until paid in full.  Repayment agreements should be honored to the best of the debtor’s ability.  One need not have a college degree in order to understand the serious nature of education gratitude to the federal government.  While filing bankruptcy on student loans seems to be concern in futility, there are option ways to find funding for repayment.  A qualified financial consultant can help individuals determine the best course of action to relieve the burden of student loan debt and ultimately enjoy the benefits of a good, excellence college education.  To know more about Student Loans, visit

Steve Young is the author of The #1 Secret On How To File Bankruptcy. To get your free CD on How to File Bankruptcy Without an Attorney, go to


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