Unpaid student loans are nondischargeable in Chapter 7, Chapter 11, and Chapter 13, requiring special handling from Arizona bankruptcy attorneys. Under 11 U.S.C. § 523(a)(8) of the U.S. Bankruptcy Code, student loans are nondischargeable obligations unless the debtor can prove that repayment of the loan would impose an undue hardship.
The harsh reality of student loans, or education loans, is that they are not normally discharged in bankruptcy. There is one very important exception to the non-dischargeability of student loans, however. Your Arizona bankruptcy attorneys may be able to establish that your education loans are causing an “undue hardship” on you or your family.
How Arizona Bankruptcy Attorneys Establish Undue Hardship
If the debtor is physically incapable of working and earning an income, then an undue hardship may exist. If your Arizona bankruptcy attorneys believe that you do indeed have an undue hardship, then they will file a lawsuit called an adversary proceeding with the bankruptcy court and present evidence to support that claim.
In a Chapter 13 Wage Earner plan, the debtor’s student loans can only be discharged if the Court finds that repayment of the loan would impose an undue hardship on the debtor. Under Rule 7001(6) of the Federal Rules of Bankruptcy Procedure, the dichargeability of student loans must be established through an adversarial proceeding. The debtor’s Arizona bankruptcy attorneys must file a complaint and serve the lender (the defendant) with both a summons and the complaint so that the creditor may fairly appear and defend the non-dischargeability of the loans. The adversary proceeding, then, determines the dischargeability of the student loan. The same applies to a Chapter 7 Liquidation and Chapter 11 Reorganization.
Evidence Presented By Arizona Bankruptcy Attorneys
Few debtors will see their student loans disappear in complete discharge for reasons of undue hardship, but certainly some will. For Arizona bankruptcy attorneys to succeed in proving undue hardship (should the student loans not be discharged) requires evidence supporting the following:
1. That the debtor is unable to repay the loans while maintaining a minimal standard of living.
2. That the current negative financial circumstances are likely to continue unabated.
3. That the debtor has honestly made every effort to pay off the loans.
Even with such evidence, it is very difficult for Arizona bankruptcy attorneys to prove undue hardship if the debtor is physically able to work or if the disability is temporary in nature and a not permanent condition affecting the debtor’s employability indefinitely.
If student loans make up a significant portion of your debt, then you need the advice and advocacy of the experienced Arizona bankruptcy attorneys at the Rosenstein Law Group.
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