What Are the Most Common Myths About Bankruptcy?
Student loan debt is a significant issue in the United States. In fact, a recent study has shown that Americans owe close to $2 trillion in student loan debt. Unfortunately, many college graduates find themselves facing a seemingly insurmountable amount of debt accumulated through student loans, and if you’re in this situation, you’re likely looking to explore your options so you can move on with your life. Here at 307 Bankruptcy, our skilled Gillette bankruptcy lawyers have extensive experience helping clients clear away their student loan debt, and we stand ready to put that experience to work for you. Contact us today for a free consultation so we can discuss your case.
Qualifying for student loan discharge through bankruptcy is challenging but not impossible. Historically, student loans have been treated differently from other types of debt, requiring individuals to meet a higher standard to have them discharged. Under the current U.S. Bankruptcy Code, you must demonstrate that repaying your student loans would cause an “undue hardship” on you and your dependents. This is assessed through a legal test, most commonly the Brunner Test, which examines whether you can maintain a minimal standard of living, whether the financial hardship is likely to persist, and whether you have made a good-faith effort to repay the loans.
Recent legal updates and court rulings have signaled a shift in how student loan debt is treated during bankruptcy proceedings. Some courts have begun to interpret “undue hardship” more leniently, and the U.S. Department of Education has shown interest in streamlining the process for borrowers experiencing genuine financial distress. These changes, though not uniform, indicate a growing recognition of the burden student loans place on individuals and families.
If you’re unsure whether your student loans qualify, our attorneys at 307 Bankruptcy can provide a detailed analysis of your situation, help you determine if pursuing bankruptcy for your student loans is a viable option, and guide you through the process ahead.
Discharging student loans in bankruptcy involves additional steps beyond the standard bankruptcy filing process. First, you’ll need to file for either Chapter 7 or Chapter 13 bankruptcy, depending on your financial situation. Once your bankruptcy case is underway, you’ll file a separate lawsuit within the bankruptcy called an adversary proceeding. This proceeding specifically addresses your student loan debt.
During the adversary proceeding, you must present evidence to the court demonstrating that repaying your student loans would cause undue hardship. This often involves providing detailed financial records, proof of income, expenses, and any circumstances—such as medical issues or long-term unemployment—that contribute to your inability to pay. The court will then evaluate your case, often using the Brunner Test or a similar standard, to determine whether your loans can be partially or fully discharged.
Yes, filing for bankruptcy typically triggers an automatic stay, which is a court order that halts most collection actions against you. This includes wage garnishments, lawsuits, and phone calls from creditors. For student loan borrowers, the automatic stay provides temporary relief by stopping payments and collection efforts while your bankruptcy case is active.
However, it’s important to note that the automatic stay is not a permanent solution. Once your bankruptcy case is resolved, student loan payments will likely resume unless the loans are discharged through the adversary proceeding. Additionally, interest may continue to accrue on your student loans during the bankruptcy process.
Our Wyoming bankruptcy lawyers understand just how overwhelming it can be to face significant student loan debt when you’re just starting out after graduation. 307 Bankruptcy is here to help you explore your options and forge a path forward. Contact our firm for a free case evaluation today.
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