If my student loan is in default, is there any way to file bankruptcy on this loan?

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If my student loan is in default, is there any way to file bankruptcy on this loan?

Approximately 2 years ago I agreed to pay $450/month for 9 months and my lender would take me out of default and put me in another program (which would allow me to pay a lot less every month). I paid for 8 months and was told that they needed more money immediately – which I could not do – so they wouldn’t take me out of default. Now I am trying to work out an agreement again, but they refuse to give me anything in writing. So I feel like they are not going to follow through on the agreement again. Is there anything I can do? I am a single mom and my income is barely $1200/month.

Asked on November 16, 2010 under Bankruptcy Law, Wisconsin

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

There are 2 situations that may allow you to be released from your student loan obligation. They are: 

1.  Bankruptcy:  While as a general rule these loans are not dischargeable in bankruptcy, it is possible if you can prove that repaying it would be a severe hardship.  This is a difficult standard to meet.  In deciding whetheror not a genuine and "severe hardship" exists, the court will consider your income/expenses, the reason for non-payment, how long this reason(s) is likely to continue, and how hard did you try to make you payments; and

2.  Cancellation:  In rare cases, you may be able to have your loan cancelled (i.e. you no longer have to pay it).  However, you'll have to meet specific conditions depending on the type of loan you have but genrally a disability or severe economic hardhip will qualify you.  In some situations, you may not be able to cancel the entire loan but you may be able to get rid of a portion of it. 

For more information you can contact The Student Loan Borrower Assistance website at www.studentloanborrowerassistance.org discusses conditions for the cancellation or deferment in more detail and how to apply for such a cancellation.  You can also contact your loan holder or the Federal Student Aid office at: 800-621-3115 or  http://www.ed.gov/offices/OSFAP/DCS/index.html) to determine if you qualify for cancellation.


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