Discharging Student Loans in Bankruptcy

Discharging Student Loans in Bankruptcy

Whether you approach the issue from the perspective of a parent, a student, a lender, a politician, or a university or college, student loan debt has been a hot topic during the past several years – and if current trends are any indicator, the issue is unlikely to resolve in the near future, especially not for Pennsylvania residents. In fact, as recently as last month, an article in Forbes noted that Pennsylvania has some of the country’s highest student loan debt per capita: a whopping $5,690, which is $770 higher than the national average of $4,920. With education debt such a pressing issue on so many people’s minds, our Philadelphia bankruptcy attorneys are frequently contacted by parents and young people who want to know if filing for bankruptcy can help. This article covers some basic information about whether student debt can be eliminated by filing bankruptcy in Pennsylvania.

Can You Eliminate Student Loan Debt by Filing for Bankruptcy in Pennsylvania?

Crushing student loan debt is a relevant financial concern for many Americans. Although federal loan servicers do offer a variety of repayment methods, many private loans do not. Additionally, there are times that, through no fault of their own, individuals simply cannot afford to repay their student loans under any repayment option.

Generally speaking, student loan debt is treated as a non-dischargeable debt, which means it typically cannot be eliminated by filing for bankruptcy in Pennsylvania, regardless of whether the debtor declares Chapter 7 bankruptcy (liquidation) or Chapter 13 bankruptcy (reorganization). However, it may be possible to discharge student loan debt under certain circumstances. In order for this to occur, specific financial criteria must be met.

In this Circuit, a debtor must satisfy the following three elements of “the Brunner test,” which stemmed from the landmark decision known as Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987), in order for his or her student loans to be deemed dischargeable:

  1. Based on current income and expenses, the debtor cannot maintain a “minimal” standard of living for himself or herself and his or her dependents if forced to repay the loans.
  2. Additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period for the student loans.
  3. The debtor has made a good faith effort to repay the loans. Making a “good faith effort” simply means acting with honesty, as a reasonable person would determine considering the circumstances.  In re Faish, 72 F.3d 298, 304-05 (3d Cir. 1995) (quoting Brunner v. New York Higher Educ. Servs. Corp., 831 F.2d 395, 396 (2d Cir. 1987)).

If all three of these statements are true, it may be possible to wipe out student loans with bankruptcy, provided the case is carefully handled by a Philadelphia Chapter 7 bankruptcy lawyer who has prior experience working on these complex types of cases. In one case, for example, the bankruptcy attorneys at Sadek & Cooper Law Offices were able to achieve a clear win for one of the firm’s bankruptcy clients. Our attorneys filed an adversary proceeding on behalf of our disabled client, and were able to force his federal and private lenders to allow the discharge of over $100,000 in his student loan debts.

In addition to the Brunner test, there is also another potential remedy known as the “closed school discharge.” The closed school discharge is available if the petitioner (1) incurred the subject student loan after January 1, 1986 and (2) was enrolled at a school 90 days prior to the institution closing. For a closed school discharge, it is most important that the student’s last day of attendance occurred within 90 days of the school’s actual closure date.

Contact a Philadelphia Bankruptcy Lawyer About Student Debt Relief

Student loan debt is a heavy financial burden to bear – especially, as statistics have recently shown, for the residents of Pennsylvania. Fortunately for financially distressed college graduates and their families, discharging student loans through bankruptcy is not necessarily impossible in this jurisdiction, and should be considered given the right circumstances. Do not let the weight of student loan debt destroy your finances. Both Chapter 13 and Chapter 7 bankruptcy are worth examining with a licensed attorney as a viable option to obtain relief from overwhelming college debt. We can sit down with you to discuss your income and financial goals to identify a course of action suited to your situation.

philadelphia bankruptcy attorney

To speak with a Philadelphia or Montgomery County Chapter 13 bankruptcy attorney or Chapter 7 attorney regarding your financial situation and to determine if bankruptcy is right for you, call Sadek & Cooper Law Offices at (215)-545-0008. Your initial consultation is completely free of charge, and we will keep your consultation confidential.

GET YOUR FREE CONSULTATION

superlawyers_badge

SEEWHAT OUR CLIENTS ARE SAYING

Thomas Wright
Thomas Wright
15:09 24 Apr 18
Sadek and Cooper Law did a great job on my bankruptcy case. I really appreciate their assistant. Thank you
Kelly McKenna
Kelly McKenna
11:57 19 Apr 18
This form - specifically Yoninah Orenstein and Patrick Cooper are PHENOMENAL. They were great to work with, very fair with legal fees, and successful in getting an excellent settlement for my divorce (short term marriage
Dessiana Cruz
Dessiana Cruz
13:11 04 Apr 18
I was nervous about bankruptcy, but from the moment I stepped in your office I felt at ease. This process was so easy with your help, that yesterday I was talking to my coworkers about it and recommending your firm to them. You make something that’s scary seem easy and I thank you so much for helping me!
Valerie Nesbitt
Valerie Nesbitt
14:51 03 Apr 18
Sadek and Cooper have been excellent. Everyone has been extremely helpful and patient. The lawyers I have worked with, Matt and Brad, are extremely knowledgeable. I felt very comfortable with them handling my case.
Marlena Lucas
Marlena Lucas
16:08 02 Apr 18
Very simple. Any time I had questions, they were answered quickly. The lawyers are just great. Just a fast painless process.
James Smith Sr
James Smith Sr
13:19 14 Mar 18
Everything has been great. Really awesome job with my case... You and your staff have done a perfect job in my opinion.
Michkel Davis
Michkel Davis
17:02 09 Mar 18
Mr. Sadek was the best and most thorough lawyer I’ve ever met. He’s very human and caring about our case. His whole staff is great too. Highly recommend...
Tamika Richardson
Tamika Richardson
14:56 01 Mar 18
My bankruptcy went very smoothly with your firm. No issues. You are all very nice. That’s why I recommend my sister to your firm and your now helping her too! Thanks again.
Geraldine Ross
Geraldine Ross
14:14 28 Feb 18
This is an Excellent firm to work with; my questions were answered in a timely manner and I felt very supportive in handling my bankruptcy. I would highly recommend this firm to others who have found themselves in a position like mine.
Lavern Baker
Lavern Baker
17:03 23 Feb 18
You are all super lawyers. Brad and Matt made me feel comfortable. Every one in your office so nice and just made it easy. You’re the best!
peter b
peter b
19:42 21 Feb 18
Thank you, Sadek and Cooper Law offices for your dedication on my behalf. I appreciate Matthew and Patrick and your staff and all that everyone did to support me in this legal matter. You took an embarrassing, sad experience, for me, and turned it into a successful solution without all the emotional pain expected. After dealing with a loan modification company for over eighteen months without going to an attorney first that is the biggest mistake anyone can make. The Modification Companies set out to sell you lies, broken promises and dilute the homeowner's assets with no knowledge of any kind of law. I can't stress enough stay away from Modification companies, as a Military Veteran and family man, protect you or your family best interest. Go directly to Sadek and Copper you will not regret it! This firm moves with Super speed and diligence protecting you and your family's the entire process, even after watching some of these other attorneys in the courtroom appearing to mishandled their clients’ cases before the Trustee. You made it easy and I’m finally getting my financial life back on track! Thank you for your prompt replies to me, your clear information and preparation needed when at the courthouse. I would of course recommend you to others and I am glad you were the one who had my case. Kind genuine law firm who treats you like family. God bless you all and I pray for your continued success in your field of expertise. This firm is Super Lawyers for a reason. They are the best at what they do! Pete
Doug Tinlin
Doug Tinlin
06:55 15 Feb 18
Brad Sadek gave me hope when he decided to handle my mortgage for enclosure defense. I had exactly 10 days left of the 30 days ultimatum given me, but he was able to bargain for an extra 30 days for me to pay up. That duration turned out just right.
Jacinth Jacinth
Jacinth Jacinth
16:07 31 Jan 18
Excellent service. Brad and Matt were outstanding and friendly. They helped me through this. I’ve never met attorneys like these. Thank you!
julie njoku
julie njoku
12:29 24 Jan 18
Brad Sadek is excellent!. He understands and he's fair. You feel like you have someone fighting for you. The staff is friendly, professional, and courteous. These guys are the best at what they do !
Owen Black
Owen Black
20:14 09 Jan 18
Thanks for the great service! I would recommend this firm highly. Throughout the years I have been helped by this firm greatly and very much appreciated.
Steven Rychalsky
Steven Rychalsky
15:30 09 Jan 18
Sadek and Cooper law office was a wonderful experience to work with. Bankruptcy is a difficult experience but they helped with the stress so much and made it easy. I would recommend Sadek and copper too anyone.
Chris Kourelias
Chris Kourelias
19:09 28 Dec 17
Working with both Brad & Matthew was a pleasure. Both gentlemen are extremely knowledgeable and helpful in providing me the right assistance needed to make the correct decision to benefit me in the long run. I would recommend both candidates to anyone looking for assistance with a reputable law firm.
Jennyfer Santana
Jennyfer Santana
21:17 21 Dec 17
Highly Recommended. Matt & Brad assisted with my case. I felt comfortable throughout the entire process. Matt was very understanding, patient, and ensured he answered all my questions! Both great guys and very friendly! It was a pleasure working with Matt and Brad.
Next Reviews Write a review
Call Us Now