Student loans are generally not dischargeable in bankruptcy “unless excepting such debt from discharge . . . will impose an undue hardship.” The legal test for “undue hardship” is very strict.

Also exempt from bankruptcy protection are domestic support obligations and income taxes less than three years old.

In a Chapter 13 bankruptcy however, a debtor may benefit from a temporary partial reprieve from his student loan obligations. In Chapter 13, the debtor is required to pay a minimum of 5% of his or her unsecured debts over a period of 3-5 years. The percentage allotted is dependent on several factors, including the amount of the debtors' income left over after deducting allowable living expenses. In a Chapter 13, student loans are treated as unsecured debts. Although, at the end of the plan, the debtor will still be liable for the unpaid balance, during the 3-5 year duration he or she will only be required to pay the percentage allotted to unsecured debts of his or her student loans, which may be as little as five cents on the dollar.

Prior to filing for bankruptcy, Buffalo bankruptcy attorney Thomas Denny will advise you precisely which of your debts are dischargeable and, if filing Chapter 13, what percentage of your disposable income will be payable to unsecured creditors..

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