The common belief among those considering filing for bankruptcy in Nevada is that student loan debt can't be discharged upon the completion of your bankruptcy. But the reality is there are debtors each year that are able to obtain a discharge of their student loan debt. The number of debtors that even seek a discharge of their student loan debt – approximately 0.1 percent of all Chapter 7 filers – is tiny. But you might be surprised at how many of those debtors are successful in their effort.
How rare is a discharge of student loan debt?
While it is uncommon for a student loan debt to be discharged, there is some evidence that has as much to do with the low number of debtors that request a discharge as opposed to those who are denied. That is because according to a 2011 study, approximately 40 percent of every bankruptcy debtor that asked for a discharge of the student loans had their debt partially or fully discharged. While the raw number of people that managed to have their student loan debt discharge is low, the fact that close to half of the debtors that asked had their requests granted is worth noting. In many of these cases, the judges involved side with debtors based on the testimony from the debtors on how the debt is a hardship.
Your Lender May Object
One reason that a request for a discharge of your student loan debt is that your lender may object. Your lender will already be a part of your bankruptcy case, and you will be required to give them notice if you intend to seek a discharge of your loans. The process in which your lender is expected to review your hardship claim was described in a 2015 letter from the U.S. Department of Education:
“First, a holder must evaluate a borrower's undue hardship claim and determine whether the holder believes that repayment would constitute an undue hardship according to the legal standards set by the federal courts.”
If, after considering your request, the lender determines that your hardship claim is valid they may not oppose your request to discharge your student loans during your bankruptcy. But if the lender disagrees with your claim of undue hardship, they will object to your request and ask the bankruptcy court to deny your claim.
The Possibility of a Discharge
Ultimately, it is up to the judge in your bankruptcy case to determine if your financial situation warrants a full or partial discharge of your student loan debt. While a discharge might make sense in your situation, it is worth noting that pursuing a discharge of your student loans can be costly and time-consuming. To better understand if making a request is in your best interest, you should discuss your case with an experienced Nevada bankruptcy attorney. If you have questions about how declaring bankruptcy will affect your student loan debt, don't hesitate to contact the experienced Nevada bankruptcy attorneys at Vohwinkel Law and schedule your free consultation.