Virginians who have student loan debt through a for-profit school may already know about a common misconception regarding student loan discharge during bankruptcy. While bankruptcy does provide a fresh financial start in many cases, it does not usually apply to student loan debt. Generally, only student loans for institutions that are not accredited or private loans may be discharged. Most federal student loans are only given to accredited schools.
Debtors are able to discharge their federal loans in some cases. It requires that the former student prove the loans were an undue burden and a financial hardship. Typically, those filing for bankruptcy have to go through a separate process to get federal loans discharged. Bankruptcy attorneys can file an adversary proceeding to challenge the dismissal of student loans. Having attended a for-profit school does not always result in automatic dismissal of student loan debts.
While some people perpetuate the misconception that no student loans are eligible for discharge in bankruptcy, many can easily be discharged. Among the best arguments to use is one that explains that private student loans were used to pay for expenses that do not qualify for protected status, such as expenses unrelated to education. Working with a debt coach is another option to help those in overwhelming debt.
A bankruptcy lawyer might be able to help student loan debtors learn whether they qualify to have their loans discharged. Loans taken out for certain institutions may actually be easy to discharge through Chapter 7 bankruptcy. Private loans that were not used for educational expenses may also be discharged. An attorney can provide representation when dealing with consumer debt and help develop a strategy to eliminate debt through the bankruptcy process.