New Bankruptcy Student Loan Laws  

In the old law, the nonprofit companies which granted student loans were not liable to tax unless the debtor could show unjustified adversity. Under the new law, this rule extends to all student loans, whether made by nonprofit or commercial units.

To release your student loan on the basis of unjustified adversity, you must file a separate act in the bankruptcy court and acquire a court ruling in your support on this concern. Usually, an action to release a student loan debt involves the services of an attorney. While it’s also feasible to do it yourself if you’re willing to put in your time and effort.

In determining unjustified adversity, most bankruptcy courts look at three factors such as poverty, diligence of poverty, and good faith. If you can show that all these aspects are there, the court likely allows you an unjustified adversity release of your student loan.

Courts seldom let student loans be discharged. They take the position that Congress needs student loans to be reimbursed. They also know that federal student loan regulations involve a lot of elasticity on the creditor’s part including cessations on payments, provisional reductions payments, and extensions of the repayment tenures that lower the monthly payments to a reasonable amount.

In few cases, courts have found that it would be an undue hardship to repay the entire loan and relieve the defaulter of a portion of the debt. Other courts prefer to either discharge the loan completely or none of it is discharged.

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