Q: Hi. I keep hearing that only a small number of people can discharge private loans in bankruptcy and I want to know what makes them eligible? I owe over $100,000 in student loans for a degree I never finished. I have multiple health issues and have not worked in years and want to know if I qualify
A: Thanks for reaching out to me, and I’m sorry to hear about how overwhelming your student loans have become.
The bottom line about student loan debts is that they are “generally” NOT able to be discharged in bankruptcy court. The exception to that rule boils down to this: You’d have to convince a judge that you are in extreme dire straits – and will continue to be in an insurmountable financial condition in the future – for them to even consider it. Unfortunately, there is no “standard” or “rule” about what qualifies. It’s totally up to each individual judge. And instances of student loans being discharged in bankruptcy court are done on a case-by-case basis.
Common problems: going through divorce, being unemployed, having medical problems or excessive credit card debt, etc. — those situations simply don’t convince judges. They’ve seen and heard all those cases before. And during the recession, of course, people’s financial situations worsened. So it’s not like people didn’t try to get their student loan debts discharged in bankruptcy.
But honestly, I don’t know of a single student loan debtor who has been able to convince a judge to wipe out their student loans — and that goes for federal and private loans.
In your case, owing a large amount of debt (over $100,000) doesn’t qualify you for relief. Also, the fact that you never completed the degree is irrelevant from the law’s standpoint. That doesn’t qualify you for a bankruptcy discharge either.
Your best bet is to probably look into the possibility of having your student loans discharged due to disability. You said you’ve been out of work for years and have multiple health issues.
To get a student loan discharged due to disability, a physician has to certify that you are “totally and permanently disabled” and will likely never work again a day in your life. Again, they make the standard very, very high to let you even qualify for a disability discharge.
I know this is not the information you’d hoped to hear. But I want you to have a realistic view of your options.
Here is more information on getting student loans discharged.
I hope this info helps.