Bankruptcy Options with Student Loans in Texas

 Posted on March 07, 2024 in Student Loans

Struggling with student loan debt can be an overwhelming and stressful experience for many Texans. While it is widely known that discharging student loans through bankruptcy is challenging, it is essential to understand that it is not entirely impossible. A Texas lawyer can help provide valuable insights and explore the various options available to seek potential relief from your student loan obligations.

The Brunner Test: Proving Undue Hardship

To discharge student loans through bankruptcy in Texas, you must demonstrate that repaying the loans would cause “undue hardship.” The courts use the Brunner test to determine whether a borrower meets this criterion. To pass the Brunner test, you must show that:

• If you have to pay back the loans, you will not be able to cover basic living costs for yourself and your dependents.
• Your current financial situation will likely persist for a significant portion of the repayment period.
• You have made good-faith efforts to repay the loans.

Meeting these requirements can be challenging but more accessible with the proper evidence and legal guidance.

Chapter 7 vs. Chapter 13 Bankruptcy

When considering bankruptcy as a means to address student loan debt, it is important to understand the differences between Chapter 7 and Chapter 13 bankruptcy. Chapter 7, or “liquidation” bankruptcy, can eliminate most unsecured debts, such as credit card balances and medical bills. However, unless you can prove undue hardship, student loans are generally not dischargeable under Chapter 7. Chapter 13 bankruptcy, or “reorganization” bankruptcy, allows you to restructure your debts and create a repayment plan lasting three to five years. While your student loans may not be discharged, Chapter 13 can provide temporary relief by reducing or eliminating your monthly payments during the repayment period.

Alternatives to Bankruptcy

If you do not qualify for student loan discharge through bankruptcy, there are still other options available to manage your debt:

• Income-Driven Repayment Plans: These plans base your monthly payments on your income and family size, potentially lowering your payments and providing forgiveness after 20-25 years of qualifying payments.

• Deferment or Forbearance: If you face temporary financial hardship, you may be eligible for deferment or forbearance, which can temporarily pause or reduce your payments.

• Loan Consolidation: Consolidating your federal student loans can simplify your repayment and potentially lower your monthly payments by extending the repayment term.

• Loan Forgiveness Programs: Certain professions, such as teaching or public service, may qualify for loan forgiveness after meeting specific requirements.

Seeking Professional Guidance

Navigating the complexities of student loans and bankruptcy can be overwhelming, but you do not have to face it alone. Working with an experienced Texas bankruptcy attorney can help you understand your options and develop a strategy tailored to your unique financial situation.

Your attorney can help you gather the necessary evidence to prove undue hardship, guide you through bankruptcy, and explore alternative repayment options. They can also ensure that you comply with Texas bankruptcy laws and protect your rights throughout the process.

Contact a San Antonio, TX Bankruptcy Attorney

By understanding the Brunner test, exploring your bankruptcy options, and considering alternatives to bankruptcy, you can take steps toward managing your student loan debt. A Boerne, TX bankruptcy lawyer can help you explore your options. Call Law Offices of Chance M. McGhee at 210-342-3400 for a free consultation.