Will Bankruptcy Discharge Student Loans?

Will bankruptcy discharge student loans is a question that has become more prevalent in today's economic crisis. The laws concerning bankruptcy and student loans changed in 1998. Until that time this was an option.

Previous to 1998, student loan could only be canceled (discharged) due to bankruptcy under certain conditions which, in general, depended on the amount of time between the date on which a loan was due or the date that the bankruptcy was filed, as well as showing repaying the loan would create undue hardship.

In 1998, the law changed and you are no longer able to use bankruptcy to discharge your student loans, except under certain conditions. You must be able to prove that repaying the loan creates an undue hardship on you or your family.

You have to be able to prove that you are not able to provide even a minimum standard of living for yourself and your dependents.

It is difficult to prove any "undue hardship" unless you are physically unable to work and there is basically no chance of your making money. To discharge your student loans under this special case, you are going to need to file a separate motion with the bankruptcy court and present your situation before a judge.

The bottom line is if your student loans are the largest part of your debt, you are better off not filing for bankruptcy because courts are very reluctant to discharge student loans.