Types of Student Loans

• First, consider the type of loan you used to pay for your education expenses; not all loans used to pay such expenses are traditional student loans. For example, if you had charged your education expenses to a credit card or paid for your education through an equity-based or secured loan, these debts could still be discharged under a Chapter 7 bankruptcy. Further, if your student loans are eligible for Income Based Repayment, the court may order you to take part in the program.
  
  

Exceptions

• You may be able to prove your education expenses are not "educational loans" in the same way the Bankruptcy Code defines it. Examples of this could include payments to an ineligible education institution. Similarly, if you did not receive an extension of credit, your tuition or boarding may not count as an educational loan under the Bankruptcy Code, such as unpaid tuition bills. The bankruptcy court may also decide that repaying your education expenses would prove an undue hardship, and grant you discharge of all your student loans, or part of them, for this reason.
  
  

Proving Hardship

• In order to prove hardship, and thus be eligible to discharge your student debts, you will have to qualify in three ways. First, you must be able to demonstrate that if you were forced to repay your student loan as it stands, you would not have enough money left over for living expenses. In addition, this financial situation will have to be shown to be permanent in order for the bankruptcy court to accept your debt as presenting undue hardship, such as if you became permanently disabled. Lastly, you have to be able to show that you have attempted to repay your education debts in good faith.
  
  

Alternatives

• If you cannot prove hardship and your student loans are not otherwise eligible for discharge under Chapter 7, you may want to consider a Chapter 13 bankruptcy. Under a Chapter 13 bankruptcy, you will be able to include your student loans in your repayment plan. Moreover, you may not have to file bankruptcy at all. Talk to your lender; you may be able to work out a modified repayment plan with your lender, defer payment until your financial situation improves or modify the terms of your student loans, such as extending the repayment period or reducing your interest rate.