CHARLOTTE, N.C. — The Biden Administration announced earlier this month more than 80,000 student loan borrowers will have their remaining federal student loans forgiven.
But what does that mean for borrowers who don’t qualify? If they file for bankruptcy, will their loans be discharged?
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You can have your federal student loan discharged in bankruptcy court if you can prove that repaying those loans would impose an undue hardship, according to studentaid.gov.
But Sheek said that’s an uphill battle and your creditors may challenge your request.
"So it becomes extremely difficult to get those student loans discharged in bankruptcy," Sheek said.
She said in order to qualify, you would have to prove to the court that you make such minimal income, that you would not be able to be off those student loans.
“That becomes problematic because, with federal student loans, you can qualify for income-driven repayment programs that are based on your income and your monthly living expenses, that IDR can be as low as zero and $0 per month.
Sheek said just filing for Chapter 7 or 13 bankruptcy won’t automatically wipe out student loan debt, but it can be a way to keep your head above water.
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“Filing Chapter 7 in order to get rid of the credit card debt or the previous repossessions, previous evictions, medical debt, you name it usually helps to get people on the right path so that they can then go and address their student loan debt.”
So what can you do if you’re swimming in debt? Sheek said to contact a bankruptcy lawyer to look at all of your options.
"Look at income driven repayment, if there's other debts that they're dealing with, in addition to student loans, like credit card debt, medical debt, give the lawyer a call, we can look at discharging those debts, in order to be able to give them at least get their heads a little above water," Sheek said.
The Department of Education's Office on Federal Student Aid offers different programs to discharge student loans. Click here to find out if you qualify.
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