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Should I File for Bankruptcy Over Student Loans in Pennsylvania?

Having student loan debt can cause people considerable financial hardship. Depending on your finances, you might be able to file for bankruptcy to discharge your student loans in Pennsylvania.

In order to get student loans discharged in bankruptcy, borrowers must file undue hardship claims. This type of claim requires borrowers to prove that their student loans are causing them undue hardship, and that certain circumstances outside their control prevent them from repaying their lenders. Getting student loans discharged in bankruptcy is challenging. Do not be discouraged if you cannot prove your undue hardship claim. Bankruptcy can still help you settle your student loan debt by consolidating all of your debts under the same low-interest rate. Bankruptcy will also erase dischargeable debts, allowing you to focus on repaying your student loans in Pennsylvania.

To schedule a free case assessment from our Pennsylvania bankruptcy lawyers, call Young, Marr, Mallis & Associates now at (215) 701-6519.

Can Your Student Loans Be Discharged if You File for Bankruptcy in Pennsylvania?

Although student loans are unsecured non-priority debts, meaning the law does not see them as urgent debts that must be repaid immediately under bankruptcy, they are not always dischargeable. You must prove undue hardship when you file for bankruptcy to erase your student loans in Pennsylvania.

Student loans are exceedingly common and leave many young people in debt the moment they graduate college. While filing for bankruptcy can help you eliminate dischargeable debts, like credit card and medical debt, it is not so easy with student loans.

You must prove undue hardship to discharge your student loan debt with bankruptcy in Pennsylvania. To do this, our Bucks County bankruptcy lawyers may aim to prove that paying your student loans will put you below the minimum standard of living and in a place of poverty. Undue hardship can also pertain to instances where borrowers have special circumstances that make paying their student loans nearly impossible, such as having a disability that makes them unable to work. For example, if you receive Supplemental Security Income or Social Security Disability Insurance benefits in Pennsylvania, those payments alone may not be sufficient to repay your student loans and could leave you impoverished. If you demonstrated good faith in that you attempted to repay your student loans and remained in communication with your student loan holder to negotiate repayment plans, that might work in your favor when seeking to discharge your student loans via bankruptcy.

The court may use the totality of the circumstances test when assessing whether or not your student loans can be discharged. This will involve evaluating all of the reasons why you may not be able to repay your student loans, such as having many dependents and living below the poverty line. Still, getting student loans discharged in bankruptcy is never guaranteed in Pennsylvania.

The success of your undue hardship claim may vary, depending on the size of your student loans, your current financial situation, and whether you have private or federal student loans.

How Can Filing for Bankruptcy Help You Repay Your Student Loans in Pennsylvania?

If you cannot prove your undue hardship claim and the court decides your student loans will not be discharged, filing for bankruptcy can still help you repay your lender and make payments more manageable. For example, entering bankruptcy will allow you to consolidate your debt under one low-interest rate, discharge other debts so you can focus on repaying your student loans, and provide you with an automatic stay so that you can arrange your finances in preparation for repayment.

Debt Consolidation

When you enter bankruptcy, your debts can be consolidated. Any non-dischargeable debts, including any student loans you may have, will be consolidated under the same low-interest rate. If high-interest rates were previously attached to your student loans, they will be lowered, meaning less interest will accrue on your debts as you repay them. During bankruptcy, you might enter mediation with student loan lenders, where we can negotiate lesser payments on your behalf. Then, our attorneys will draft a repayment plan and submit it for court approval. If the repayment plan is approved, you can begin repaying your student loans over a pre-determined period of time without them growing too much. This can allow you to get a handle on your student loans. Chapter 13 bankruptcies require repayment plans. Such repayment plans take between three and five years to complete. Suppose you file for Chapter 7 bankruptcy in Pennsylvania. In that case, certain assets of yours will be liquidated to satisfy your student loans and any other non-dischargeable debts you may have in Pennsylvania.

Discharge of Other Debts

Student loan borrowers might have other debts, like credit card and medical debt, that impede their ability to repay their student loans. When you file for bankruptcy in Pennsylvania, debts eligible for discharge will be erased. If you file Chapter 7, they will be erased immediately. If you file Chapter 13, they will be erased once your repayment plan is complete. Getting eligible debts discharged can allow you to focus solely on repaying your student loans. This can give you the financial relief you need to restructure your finances to satisfy your debt to lenders.

Automatic Stay

Filing for bankruptcy results in an automatic stay. Student loan lenders cannot contact you about making payments when this happens. This will allow you time to assess your finances and make a plan moving forward. Automatic stays are available to most bankruptcy filers in Pennsylvania. If you have filed for bankruptcy in the recent past, you might have to petition the court to get an automatic stay on your student loan payments in Pennsylvania.