How You Can Get Rid of Student Loan Debt in Chapter 7 Bankruptcy
Debt is a vicious cycle and sometimes it spirals out of control. If you have piled up a huge amount of student loan debt, you must be looking for ways to free yourself from the burden. Chapter 7 bankruptcy is not usually a way to discharge your student loan debts but on certain occasions, it might allow you to do so.
Chapter 7 Bankruptcy: The basics
Chapter 7 bankruptcy is the legitimate procedure where the US trustee sells non-exempt assets of the borrower to compensate the creditors. The sale proceeds would be allocated among all the creditors and the outstanding balances are discharged in a lawful manner. The borrower no more has any responsibility to pay anything towards the debts that have been discharged.
Once a borrower files for Chapter 7 bankruptcy, he can become debt free within one or two months of filing it. As soon as the process of Chapter 7 bankruptcy starts, debtors will stop receiving calls and other forms of communication from their creditors.
How to get rid of student loan debt under Chapter 7 Bankruptcy
When paying off your student loans is the biggest challenge you are confronting, you should not assume that filing for Chapter 7 Bankruptcy will eliminate all your debts. Despite the fact that Chapter 7 Bankruptcy can be used as an effective tool for discharging majority of commercial debts (Credit Card Debt, Business Debt, Foreclosure Debt, Repossession Debt), debts arising from student loans don’t usually qualify for discharge under this form of bankruptcy.
However, there is an exception. If the student is able to substantiate before the bankruptcy court that his/her financial condition does not show signs of improvement in the days to come and the payments that he is making every month are really causing immense financial difficulties on him and his household, then the judge of the bankruptcy court might discharge the outstanding balance of his/her student loan. This is a special situation.
Students have to follow the following steps to discharge their student loan debt under Chapter 7 Bankruptcy:
- He has to fill out an adversary proceeding form. After filling it out, he has to submit it to the court clerk. Subsequently, a summon will be issued in your name.
- The creditor should be served with the summons after the normal service process in the state.
- Collect substantiation about your financial difficulties and submit them to the judge when he asks for them. The judge will check them and give a verdict on whether you are eligible for discharging of your student loan debt.