Education & Career

Should the "undue hardship" standard to discharge student loans be extended to apply to personal student loans such as student loafrom family members?

Does not apply to private loans, such as those from family members
Does not apply to private loans, such as those from family members

You may have your federal student loan discharged in bankruptcy only if you file a separate action, known as an "adversary proceeding," requesting the bankruptcy court find that repayment would impose undue hardship on you and your dependents.
Qualifying for Discharge in Bankruptcy
You must file for bankruptcy and demonstrate to the bankruptcy court that repaying your loan would cause undue hardship. This must be decided in an adversary proceeding in bankruptcy court. Your creditors may be present to challenge the request.
How Courts Determine Undue Hardship
The bankruptcy courts do not use a single test to determine undue hardship but may look at the following factors to determine whether requiring you to repay your loans would cause an undue hardship:
If you’re forced to repay the loan, you would not be able to maintain a minimal standard of living.
There is evidence that this hardship will continue for a significant portion of the loan repayment period.
You made good faith efforts to repay the loan before filing bankruptcy.

If the Court Determines Repayment Would Cause Undue Hardship
What happens next depends on the terms of the bankruptcy court’s determination. The terms may include one of the following:
Your loan may be fully discharged, and you will not have to repay any portion of your loan. All collection activity will stop.
Your loan may be partially discharged, and you will still be required to repay some portion of your loan.
You may be required to repay your loan, but with different terms, such as a lower interest rate.

If the Court Doesn’t Discharge Your Loans
If the court doesn’t discharge your loans, you may be looking for affordable repayment options. Many repayment plans exist, and switching to a plan that’s a better fit is usually possible. Contact your loan servicer if you would like to discuss repayment plan options or change your repayment plan.

Should the "undue hardship" standard to discharge student loans be extended to apply to personal student loans such as student loafrom family members?
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