Can Bankruptcy Discharge Private Student Loans?
Bankruptcy can’t eliminate federally guaranteed student loans, such as Stafford loans, but this rule doesn’t always apply to private student loans. Unlike federal loans, private student loans may be discharged through bankruptcy if you meet certain qualifications.
A private student loan, in short, is a financing option for individuals who want to seek higher education and need support aside from traditional financial aid to achieve this goal. Private student loans can replace or supplement federal loans and are a viable option for many people.
Does Your Private Student Loan Qualify for Discharge?
A variety of factors determine whether you can discharge your private student loan.
- Is your school accredited?
Where you went to school may influence the outcome of your bankruptcy filing. If your school was not accredited, you may be able to eliminate school debt through Chapter 7 bankruptcy.
Flight schools are a common example of this situation. Many pilots get the education they require through unaccredited trade schools, accumulating massive debt.
When these students are unable to pay back their trade school loans, they may be able to discharge the debts through bankruptcy. Why? The loan technically wasn’t a “higher education expense.” In short, it wasn’t a typical student loan.
- Were you an eligible student when you obtained the loan?
If you were not an “eligible student” when you obtained the loan, meaning you were enrolled in at least half-time at a degree or certificate program, you may be able to have your student loan discharged. The reason is because since you were not a student, the loan was technically not a student loan.
- Did you spend a portion of your loan on non-school expenses?
Even if your loan appears to meet the qualifications for “higher education expenses,” you might be able to eliminate it through Chapter 7 bankruptcy, depending on how you actually used the loan.
Consider this: you took out the loan to pay for school, but actually used a portion of it for other expenses. This portion of the loan may be discharged when you file for bankruptcy.
Struggling to Pay Off Student Debt? Call Us.
If you are having trouble paying off your student debts, talk to one of our bankruptcy lawyers for more information. We can review your situation and determine whether bankruptcy can provide effective relief for you.
Only a qualified bankruptcy lawyer can help you understand your legal rights and options. Contact our Southern California bankruptcy law firm today for more information!