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The Undue Hardship Exception for Student Debt in Arlington Bankruptcy

Michael Strong
Senior Attorney, Strong Law Firm
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 invalidated some of the loan forgiveness previously available to debtors seeking relief under bankruptcy law. One of the most difficult changes made by the BAPCPA is its reclassification of any education loan eligible as a tax deduction as non-dischargeable.

This means all student loans must be repaid in full, even after bankruptcy.

Previously, private loans made to students by banks or financial companies could be forgiven in Chapter 7 liquidation bankruptcy. Now, the only means through which student debt can be eliminated is through a judge ruling that those loans present an undue hardship on the debtor or their dependants.

To be considered for an undue hardship exception, a debtor must first file a separate motion in bankruptcy court specifically for the exception. They then will arrange to meet with the judge presiding over their case to explain the circumstances of the motion.

It is necessary then for the individual to establish with the judge the following three points:

  1. They have done everything in their power to repay the loan;
  2. It is probable that their financial problems will continue or get worse; and
  3. They cannot uphold even a very basic standard of living while repaying the loan.

So long as the debtor is physically capable of working, it is unusual for them to qualify for the undue hardship exception. 

Other Options for Consumers with Outstanding Student Loans

You may be able to consolidate your student loan payments, along with other debt, into manageable monthly payments under Chapter 13 repayment bankruptcy.

Be aware that in order to qualify for this kind of consolidation, you must present Virginia bankruptcy court with a feasible repayment plan detailing how you will repay your debts over the next 3 to 5 years.

You may also be able to renegotiate the terms of your loan with the lender, making lower payments over a longer period of time.

Don’t enter into the bankruptcy process without knowing your options. If you are struggling with bills, including overwhelming student loan payments, talk to an Arlington bankruptcy lawyer at The Strong Law Firm. We serve consumers dealing with Virginia, District of Columbia, and Maryland debt. For your confidential, no-cost case review, call our offices today at 887-344-8189. Reach us through our website by submitting a quick online contact form.