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Can I erase my student loans by filing bankruptcy?
Generally, student loans are not discharged in bankruptcy.
In 11 U.S.C. sec. 523(a)(8) there are two exceptions to this
general rule:
1. The student loan may be discharged if it is neither "insured
or guaranteed by a governmental unit" nor "made
under any program funded in whole or in part by a governmental
unit or nonprofit institution."
2. The student loan may be discharged if paying the loan
will "impose an undue hardship on the debtor and the
debtor's dependents."
It is usually difficult to have
student loans erased under the undue hardship standard.
Whether an exception
applies under this law depends on the
facts
of
the
particular
case and may also depend on local court decisions. Even
if a student loan falls into one of the two exceptions, discharge
of the loan may not be automatic. You may have to file
an
adversary proceeding in the bankruptcy court to obtain
a court order declaring the debt discharged.
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