Can I erase my student loans by filing bankruptcy?

Usually, student loans are not discharged in bankruptcy. In 11 U.S.C. sec. 523(a)(8) there are 2 exceptions to this general rule:

1. The student loan may be discharged if it is neither "insured or guaranteed by a governmental unit" nor "made under any program funded in whole or in part by a governmental unit or nonprofit institution."

2. The student loan may be discharged if paying the loan will "impose an undue hardship on the debtor and the debtor's dependents."

It is typically tough to have student loans wiped out under the undue hardship standard. Whether an exemption applies under this law depends on the details of the specific case and may also depend on local court decisions. Even though a student loan falls into one of the two exceptions, discharge of the loan may not be guaranteed. You may have to file an adversary proceeding in the bankruptcy court to acquire a court order announcing the debt discharged.

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