Discharging Student Loans in Bankruptcy

News reports suggest that default rates on student loans rose to 8.8 percent.  With poor job prospects, lower wages for those who have employment and high costs for tuition we have a perfect storm for default on student loans.

The problem is student loans are not dischargeable in bankruptcy except in extraordinary circumstances.  Banks and education loan institutions will fight tooth and nail to ensure that their federally backed loans are not discharged.  Often the cost to discharge the loans could be more than the loan itself.

The best option when facing student loan repayments is to discharge unsecured debts, such as credit card, healthcare and personal loans, by filing bankruptcy and then working out a repayment plan with the student loan provider.  Repayment plans options can include forbearance, deferment, income contingent repayment or income sensitive repayment.