Legal Question in Bankruptcy in New York

Bankruptcy and Federal Student Loans

I am a 24 year old who is seriously considering Bankruptcy soley due to a 30+ thousand dollar debt due to student loans. I've read online about how student loans are exempt from bankruptcy unless certain circumstances are proven concerning the person involved. I was curious about what these circumstances were exactly and how difficult it would be to file bankruptcy due to the loans which I cannot see myself being able to pay even half of my minimum monthly payment as it is currently. Paying half (all I can afford without sacrificing rent and food costs) will still cause me to acrue late fees regardless of the fact that I'm TRYING to pay what I can without sacrificing the basic bills I have to continue to even live such as rent. I really need help here I'm at my wits end. It has been 2 years nearly since I have been out of school. I have already deferred due to economic hardship (which was accepted given my financial status proven by pay stubs) and am out of deferrment options. I cannot afford to even continue schooling in order to defer my payments. I don't see many choices and I need any advice I can get. I appreciate any responses.

-R.R.


Asked on 1/21/04, 5:39 pm

1 Answer from Attorneys
Eric Kochel The Law Office of Eric David Kochel, Esq., P.C.

Re: Bankruptcy and Federal Student Loans

You can not discharge student loans in bankruptcy unless you can show "extreme hardship". This is an almost impossible standard to prove unless you are practically a single mother on welfare below the minimum poverty standard or in a similar situation. In addition - to qualify you would most likely need to bring a "motion for determination of dischargeability" - an adversary proceeding in bankruptcy court. You would incur sizable legal bills and most likely lose the case. Your best option is to consider the income sensitive repayment option of the federal government's Ford Direct Student Loan Program. You would likely qualify for a program in which your income would allow your monthly payments to be 0 - and if your income remains low - after a certain number of years the loan is written off. Contact the following for information:

http://www.ed.gov/offices/OSFAP/DirectLoan/index.html

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Answered on 1/23/04, 11:20 am


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