Filing for bankruptcy is a serious decision, and if you are considering it, you might wonder if it’ll discharge your student loan debt. In Missouri, as in the rest of the United States, student loans are notoriously difficult to discharge through bankruptcy. However, understanding the basics of how it works can help you decide what steps to take.
Understanding the bankruptcy process
Bankruptcy is a legal process that helps individuals who cannot pay their debts get a fresh financial start. There are different types of bankruptcy, such as Chapter 7 and Chapter 13. These differ in how they handle debt and what assets you might have to sell.
Discharge of student loans
Under federal law, you may only use bankruptcy to discharge your student loans if you can prove that repaying the loans would cause “undue hardship.” The standard for undue hardship is high, making it difficult to meet the requirements.
Missouri courts, like those in other states, use the “Brunner test” to determine if undue hardship applies. This test involves proving three main points:
- The inability to maintain a minimal standard of living
- The persistence of this condition for a significant portion of the repayment period
- Good faith efforts to repay the loans
Proving undue hardship
To successfully argue undue hardship in Missouri, you must demonstrate that you have made sincere efforts to repay your loans, but circumstances beyond your control prevent you from doing so. The court will look at factors like your income, expenses, and any attempts to negotiate with lenders. It’s important to provide thorough documentation and evidence to support your claim.
Finding a path forward
Navigating student loan debt can be overwhelming, but knowing the limitations and possibilities within the bankruptcy system can guide your choices. Staying informed and proactive is key to managing your financial future effectively.
