To discharge student loans in bankruptcy, you must show that repaying them would be an "undue hardship." Under the Justice Department's attestation process, government attorneys answer that by asking three questions.
1. Can you afford to pay right now?
The government compares your income with your necessary expenses. For many expenses — like housing, food, transportation and health care — it uses standard amounts published by the IRS, adjusted for where you live and the size of your household.
If your necessary expenses equal or exceed your income, the government treats you as unable to pay right now.
2. Is that likely to continue?
A hard year isn't enough on its own. The question is whether your situation is likely to last. The government presumes it will if, for example:
- You are 65 or older
- You have a disability or chronic injury that affects your ability to earn
- You have been unemployed for at least five of the last ten years
- You did not complete the degree your loans paid for
- Your loans have been in repayment status — not counting time you were in school — for at least ten years
If none of these apply, the government looks at your specific facts to decide whether your hardship is likely to continue.
3. Have you acted in good faith?
The government looks at whether you've made reasonable efforts to earn income, manage your expenses and deal with your loans. Contacting the Department of Education or your loan servicer about payment options counts.
Importantly, you don't need a perfect payment history. Not having made payments doesn't disqualify you on its own. And not enrolling in an income-driven repayment plan isn't held against you if you have a reasonable explanation.
What this means for you
If your situation fits these questions, the government may support discharging all or part of your loans. The bankruptcy judge makes the final decision.
The best way to find out is to have your documents reviewed. The first conversation is free; the $100 qualification review is credited toward your fee if you hire us. Call 702-386-8600.