Bankruptcy

If you filed Chapter 7 or Chapter 13 bankruptcy after October 7, 1998, you may have your loan discharged only if the bankruptcy court finds that repayment would impose undue hardship on you and your dependents. This must be decided in an adversary proceeding in bankruptcy court after the conclusion of the bankruptcy. Your creditors will be present to challenge the request. The court uses a three-pronged test to determine hardship:

• If you are forced to repay the loan, you would not be able to maintain a minimal standard of living.
• There is evidence that this hardship will continue for a significant portion of the loan repayment period.
• You made good-faith efforts to repay the loan before filing bankruptcy (usually this means you have been in repayment for a minimum of five years).

Your loan will not be discharged if you are unable to satisfy any one of the three requirements. If your loan is discharged, you will not have to repay your loan, and all collection activity on these loans ends. You would also regain eligibility for Title IV student loans. To get your loan discharged for reasons of bankruptcy, you must petition the bankruptcy court to reopen your case.