Bankruptcy And Student Loans Do Not Always Go Together

Whenever a person considers filing for personal bankruptcy and student loans make up a good part of their debt, there is a good chance the loans will not be discharged. In 1998, when the governments rules regarding bankruptcy were changed, student loans were ruled to be non-dischargeable as many financial institutions were losing million of dollars.

The reason being that many financial institutions were losing millions of dollars and the government was losing millions as well because the federal government guaranteed many of these student loans.

Today, the person claiming Chapter 7 bankruptcy has to show that an undue financial hardship will result if the loans are not discharged. As in many cases with bankruptcy and student loans make up a large portion of the individuals debt, a portion of the loan may be discharged by the judge, but most of the loan will remain a legal debt.

If the student loans have been sold repeatedly to other lenders with varied interest rates, the exact balance may be hard to determine. In cases such as this, some or all of the entire balance may be discharged.

Source