Legal Question in Bankruptcy in New York

Re: Defining 'Undue Hardship' for student loan discharge

Yes, it is true that student loans may be discharged in bankruptcy if "undue hardship" is found. However, to qualify you need to be at the lowest poverty level. In addition you need to bring a motion in bankruptcy court to determine dischargeability. this is known as an adversary proceeding - somewhat like a trial without a jury. You and others would be called in to court, examined and cross-examined and a judge would decide the case. The student loan people would also testify and have their lawyers. The biggest problem with all this is that you would incur large legal fees unless you qualify for a free state or county legal aid service. If the student loans are over 7 years old you may have better luck.

Re: Defining 'Undue Hardship' for student loan discharge

There is a 'hardship exception' to the non-dischargeability of student loans.

Some of the requirements are complicated and formalistic, so I will describe the current requirements on the debtor. (1) there must have been good-faith efforts to pay. (2) the debtor must need the monthly installment money to maintain a 'basic/minimal standard of living' (be forced into 'public assistence' in order to pay the monthly installment), and (3) the poverty/need of the debtor must be likely to continue for at least the next 6 months.

This is a new one for me. I have never made such a motion/petition to have a student loan discharged.

As you can see, in the right situation it can be done, but not often. Disability or long-term unemployment with a family to support are common situations for this extra-ordinary claim.

ghood luck.