Student Loan Discharge After Bankruptcy

Hi. This is Roger Ghai and I wanted to talk today a little bit about whether your student loan can be discharged or your student loans — if you have more than one, can be wiped out by filing a chapter seven case. Generally speaking, I’m just going to tell you point-blank I get a lot of calls on this. The answer is absolutely probably not. You have to almost be extremely indigent for your student loan to get wiped out.
Let’s say — for example, that you’ve gotten a law degree and you have $200,000 in student loans, but you just can’t get a job that pays more than $50,000 a year coming out of law school. You think, “Well, what good did it do? I’m going to have to file bankruptcy and I’m going to have to get rid of all of my debt.” Well, that’s not how the court is going to look at it. They’re going to look at the earning capacity of that degree.
It could be that you’ve gotten a medical degree and you still have significant amounts of loans relating to that degree. The fact that the job market isn’t very good and that in actuality, you’re not going to be able to earn what you had hoped for in order to pay back those student loans is not going to help you want iota.
You may be running into a situation where you’re trying to discharge your student loan and maybe even you have some physical impairments that are going to prevent you from working or significantly curtail your time to work. Again, the court is really going to look at whether that’s going to be a permanent thing, whether you’re going to actually get physically better and be able to be gainfully employed, those types of things.
You have to be virtually declared to be totally incompetent and in an insane asylum and be indigent before the court is going to find that yes you do meet all four prongs of the hardship test and that’s what it is. There’s basically four prongs whenever you’re trying to get a student loan discharged. For most people — 99.9% of the people, they just simply can’t make it.
There are other ways to deal with your student loans in case you find yourself in that terrible situation. One of which is you may have to just file a lawsuit against the student loan company. If you are actually sued by the student loan company, you may need to get a lawyer to help you with that lawsuit because there’s probably going to be technical deficiencies from a civil law perspective — not in the bankruptcy context, that is going to allow you to get a substantial reduction on the student loan.
If that doesn’t work, you may want to contact — I think it’s the William D. Ford repayment program and they have certain rules and regulations that may give you relief if you find yourself in a very burdensome student loan situation. If you have questions about your student loan debt and whether you can actually — based on your own circumstances, can file a complaint against the student loan company in the bankruptcy context to have the debts wiped out, call my office at 770-792-1000.