Everett Bankruptcy Lawyers Understand Hardship Discharges

Posted on March 30, 2009
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At the end of a Chapter 7 bankruptcy, when all the requirements have been successfully completed, most remaining debts will be discharged by the bankruptcy trustee handling the case. However, a number of debts are not eligible for automatic discharge under Chapter 7. Educational loans are one of those debts. Lawyers in Everett who practice Bankruptcy can advise you on other debts that may not be dischargeable.
Educational or student loans are subject to closer analysis by the bankruptcy court before they may be discharged in entirety. The trustee assigned to your case will decide if exempting these loans from the bankruptcy will cause “undue hardship” on the debtor and his or her dependents, along with input from Lawyers in Everett who practice Bankruptcy. He will subject these debts to three tests:
1. Will exempting these debts from discharge create an “undue hardship” on the debtor’s income? In other words, will exempting these debts from discharge cause the debtor to be unable to provide food and shelter for his or her family to a minimum standard?
2. Is it reasonable to assume that the income of the debtor is likely to remain at a level that makes statement 1 true for thegreater part of the repayment period of the loan? In other words, is the debtor’s income likely to soar in say, a year or so, making future repayment of the loan more than possible?
3. Has the debtor made a good faith effort in the past to repay these loans? Did the debtor at least try to pay off his or her student loans in a timely manner in the past? Is the inability to pay a recent event?
At the time the bankruptcy petition is filed by Everett bankruptcy lawyers, the debtor needs to demonstrate that he or she cannot make the loan payments and will not be able to in the future. The Bankruptcy Code does not establish set guidelines for determining the dischargeablity of educational loans and the assessments may vary from court to court. Additionally, the fees associated with filing for hardship discharges are usually not included in the standard fee for filing a bankruptcy petition and must be arranged for separately.

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