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Bankruptcy May Be Your Option

Student loan debt relief options

For many people in Oklahoma, part of the American dream is to pursue a college education. In order to achieve this dream, student loans are often a necessary evil. In some cases, however, these people ultimately end up with more debt that they can manage if they cannot find a job in the field of their education, for example. As a result, they may begin to explore their options for debt relief. While some may be discouraged to know that student loans are not automatically dischargeable in bankruptcy, many loans that a student may utilize to pay for college are not actually considered student loans under federal Bankruptcy Code.

There are two different types of students loans: private and federal loans. While federal student loans can only be discharged under certain relatively extreme circumstances, private loans can be automatically discharged through bankruptcy proceedings in certain situations. This is because an actual student loan can only be given by what the U.S. Bankruptcy Code describes  an "eligible education institute."

To determine if a loan is private, the debtor can use the National Student Loan Data System to see if his or her loan is listed there. If not, it is likely a private loan. If it is private, the next step is to determine if it was issued by an eligible institution by examining the list released by the Department of Education the year the loan was issued. If the institute that issued the loan is not listed, the debtor may be able to have the debt automatically discharged as part of bankruptcy proceedings.

When most people are signing loan documents that will allow them to attend an institute of higher education, there are many future circumstances of which they may be unaware that may cause them to struggle with their loans. While many students loans may not be automatically discharged, a debtor may have a path for debt relief for a private loan issued by an institute not considered eligible by the Department of Education. A professional with experience with bankruptcy law can help those in Oklahoma struggling seek debt relief.

Source: huffingtonpost.com, "Some Private Student Loans Eligible for Automatic Discharge in Bankruptcy", Richard Gaudreau, June 21, 2016

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