STUDENT LOAN
DISCHARGEABILITY
IN CHAPTER 7 BANKRUPTCY
IN NEW JERSEY
TRAVIS J. RICHARDS
Student loan debt is a major problem in the United States. At this time, college students and college graduates owe over $1.2 trillion dollars in student loan debt. While most unsecured debts are discharged through bankruptcy, most student loans are non-dischargeable in Chapter 7 bankruptcy or under any other chapter of bankruptcy. This makes it very difficult for individuals who experience a financial crisis such as job loss, the death of a spouse, divorce or a medical emergency to get back on their feet. Even though the debtor can discharge most of his or her debt through bankruptcy, the debtor is left to deal with the student loans on his or her own.
Bankruptcy is designed to give a debtor a fresh start so that he or she can begin to recover and rebuild after experiencing financial problems. Because most student loans remain after the bankruptcy case has ended, debtors often
continue to struggle to pay their student loans thereby keeping them from truly having a fresh start to begin repairing and rebuilding their finances. Some
student loans may be discharged through bankruptcy; however, the debtor must meet strict requirements in order to have his or her student loans discharged.
When Are Student Loans Dischargeable In Chapter 7
Bankruptcy?
There are cases where a debtor may be eligible to discharge his or her student loans in a Chapter 7 bankruptcy; however, the debtor must meet all three
1. If the debtor is required to repay the student loans, the debtor’s income and expenses will not allow the debtor to maintain a minimal standard of living for the debtor and the debtor’s dependents.
2. The debtor must present evidence to demonstrate that the debtor’s current financial state will continue for a significant portion of the repayment
period for the student loans.
3. The court must determine that the debtor made a good faith effort to repay the student loans. While there is not a prescribed standard to determine “good faith effort,” many bankruptcy judges have ruled that a debtor who has made the minimum payments on student loans for the five years prior to the filing of the bankruptcy case has met the good faith standard.
In order to discharge student loans in a Chapter 7 case, the debtor must file a petition with the court and a hearing must take place where the debtor will present evidence to prove to the court that he or she has met all three of the above standards. It is then up to the judge whether or not to allow the student loans to be discharged through the bankruptcy case.
What Can I Do If My Student Loans Are Not Dischargeable?
In most cases, student loans are not dischargeable in bankruptcy; however, a bankruptcy can still
provide the debt relief that you need in order to manage student loan debt. After filing
bankruptcy, most debtors find that they can work with their student loan lenders to find a
repayment plan that
allows them to repay their
student loans while rebuilding their finances. Below are some tips to help you manage student loans more wisely.
Discuss repayment options with your student loan lender. Student loan lenders have a variety of repayment plans ranging from income-based plans to plans that increase payments slowly to allow the debtor to recover from a financial crisis or increase income as they advance in their career.
Choose automatic drafts. Most student loan companies offer a small discount on the percentage if you agree to have your payments
automatic drafts will decrease the risk that you are late on payments thereby incurring late fees.
Make a budget. If you have never used a budget, now is the time to begin. Living with a budget helps you to reduce spending so that you have more money coming in than you have going out. This is an essential
element of managing your money wisely including repaying your student loans.
Review the terms of your student loan. Make sure you read the fine print
of your student loan accounts. In many cases, the student loan agreements provide details about assistance that is available to debtors who are unable to pay their student loan payments.
Contact an Experienced Mount Holly Bankruptcy Attorney
Personal Approach, Professional Service, Affordable Payment Plans
The Law Office of Travis J. Richards, LLC is a full-service Mount Holly bankruptcy law firm focused on Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, debt
consolidation, credit repair, tax liens, student loans and foreclosure. We represent clients in Burlington County and throughout South Jersey.
If you are experiencing financial problems due to debt, contact our office at
609-267-5297 to schedule your free consultation to discuss bankruptcy and
non-bankruptcy alternatives. You may also use our convenient online contact form and one of our friendly, professional staff members will contact you to answer your bankruptcy questions and/or schedule a free consultation with Travis J. Richards.
About the Author
Travis J. Richards
Travis Richards is not your typical attorney. He understands the random curve balls life throws at honest, hard-working people. Growing up on farm in Southampton, New Jersey, money didn’t always come easy for many of his family, friends and neighbors. He saw that bad things often happen to good people. This background shaped his approach to the practice of law. Mr. Richards considers it a privilege to help clients from all walks of life recover from financial hardship. In doing so, he aims to provide every client with the same service he would provide a member of his own family. His mission is to get to know each client individually and provide the best legal advice possible for them to regain control of their lives.
“Over the past decade I have impacted the lives of hundreds of individuals and families in an extremely positive way,” he says. “Through bankruptcy I am able to show my clients a freedom that they thought impossible to achieve…My goal is not only wipe out the debt they have accumulated, but also help make sure they will never be in a situation to need my services again.” Mr Richards has helped hundreds of individuals eliminate debt, keep their property and return to financial stability. “Bankruptcy gives deserving individuals a second chance.”
Mr.Richards graduated with honors from Rutgers University, in New Brunswick, NJ where he majored in History. In 1999 he graduated, again with honors, from Rutgers School of Law, Camden, NJ. He was admitted to the New Jersey and Pennsylvania Bar in 1999, where he is licensed to practice law before the United States District Courts. Mr. Richards practices bankruptcy, mortgage loan modification work, debtor rights and credit card negotiations. He maintains memberships in the National Associate of Consumer Bankruptcy Attorneys, the Burlington County Bar Association, the New Jersey State Bar, the Pennsylvania State Bar, and the American Bankruptcy Institute
The Law Office of Travis J. Richards
141 High Street Mount Holly NJ 08060 Phone: 609 267-5297
Fax: 609 267-5295
