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Proving the Undue Hardship of a Student Loan in Bankruptcy: What is a Good Faith Effort to Repay?

In order to discharge a student loan in bankruptcy, you must prove that it presents an "undue hardship."  In order to do this, bankruptcy courts have required that there must be at some point some good-faith effort to repay the loan.

The courts looks at several things to determine this, including:

  • whether the debtor has applied for the Income Contingent Repayment Plan if it is a federal loan;
  • situations where the debtor had made minimal (in one case, only $4,093.52 on an overall loan balance of $84,604.65), or no, payments; and
  • whether the student loan was a significant portion of the overall debt in the bankruptcy.

Therefore, it is clear that if you are seeking to discharge a student loan in bankruptcy, you must do more than just show current, dire financial straits. You must seek to be employed to the maximum of your potential, and address payment in some significant way.

So What Do I Do?

Outstanding student loans continue to be a real problem for many New Jersey residents. If you live in southern New Jersey and are considering filing bankruptcy to discharge your student loans, please feel free to call me at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case.

If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.

If you have federal student loans and would like more information about how to deal with them, you can dowload my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.

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