Educational loans are generally not discharged by a Chapter 7 or Chapter 13 bankruptcy. They may be dischargeable, however, if the court finds that paying off the student loan will impose an undue hardship on the debtor, and his or her dependents. In order to qualify for a hardship discharge, the debtor must demonstrate that he or she cannot make payments at the time the bankruptcy is filed and will not be able to make payments in the future.

The Bankruptcy Code does not specifically define the requirements for granting a hardship discharge of a student loan. Courts have applied different standards, but they often apply a three-part test to determine eligibility: (1) income — if the debtor is forced to pay off the student loan, the debtor will not be able to maintain a minimum standard of living for himself or herself, and his or her dependents; (2) duration — the financial circumstances that satisfy the income test in (1) will continue for a significant portion of the repayment period; and (3) good faith — the debtor must have made a good-faith effort to repay the loan prior to the bankruptcy. For more information contact us today at (303) 438-8477.