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Right at the start we have to say that both Federal and Private (2005) student loans are non dischargeable, however there are still exceptions that allow you to file and have them discharged.

The goal of federal bankruptcy law is to provide the honest debtor with a fresh start. A bankruptcy case is commenced by the filing of a petition. You must also file a statement of your assets and liabilities and schedules listing your creditors. Not all this applies to student loan debt. Student loans are not discharged in bankruptcy, but there are exceptions that will quickly eliminate student loan debt.

In case where you find yourself not able to pay off debts, you file for what is called a personal bankruptcy. In order to remove debt from your burden you declare personal bankruptcy and simply have the debt being forgiven. Personal bankruptcy requires lot's of work and paperwork, but if you need to do it, do it.

First, let's explain how personal bankruptcy works. Bankruptcy can be very stressful, and it will put an end to your credit rating for a long time. The federal bankruptcy law is designed to provide someone with a fresh start when his/her debt is climbing at a rate faster than he or she can pay it off.

You enter bankruptcy with the help of a qualified bankruptcy attorney. The attorney should be able to see if there are any possible alternatives. If bankruptcy be the only option, you'll begin by filing a petition with a statement of your assets and liabilities. Once this is complete you will have to prepare a list of your creditors.

There are two types of personal bankruptcy. Chapter 7 and Chapter 13. Chapter 7 involves liquidating your assets. The assets are turned over to the courts. A trustee of the courts reduces the debtor's assets to cash (liquidation), and then pays the creditors. State or federal law could exempt some assets in both types of bankruptcy. The property a debtor can keep through the bankruptcy is determined by the specific exemptions.

Chapter 13 bankruptcy is filed by a debtor who has a valuable asset, such as a house, that he or she wishes to keep. This asset is not covered by the state or federal exemptions. Under this type of bankruptcy, the debtor, through the courts, sets up a plan of payment with the creditors. The plan spans several years. Often the creditors, in hopes of getting something sooner than later, will settle for less than the full amount. This will work for someone with a steady source of income. Rules and regulations are given out by the court. You and the creditor must follow them.

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  Can I get a credit card after filing bankruptcy? - YES
  Will I have to go to court? - YES
  Will filing bankruptcy affect my credit? - YES
  Can I erase my student loans by filing bankruptcy? - YES and NO
  Can a married debt file without the other spouse? - Yes
  How often can I file bankruptcy? - Chapter 7 After 6 Years, Chapter 13 Any Time

The federal law does not allow students to discharge debt in personal bankruptcy, but the two exceptions to the rule are:

1. The student loan may be discharged if it is neither insured or guaranteed by a governmental unit nor made under any program funded in whole or in part by a governmental unit or nonprofit institution.

2. The student loan may be discharged if paying the loan will "impose an undue hardship on the debtor and the debtor's dependents."

It is usually difficult to have student loans erased under the undue hardship standard. Whether an exception applies under this law depends on the facts of the particular case and may also depend on local court decisions. Even if a student loan falls into one of the two exceptions, discharge of the loan may not be automatic. You may have to file an adversary proceeding in the bankruptcy court to obtain a court order declaring the debt discharged.

One other way to have your Student Loans discharged is to contest the enforceability of the loan. Student loans are contracts like any other loan and are subject to challenge for fraud, etc. Also, students loans are not enforceable when the school has closed prior to the student completing his education. These challenges could be raised in a Chapter 13 proceeding and decided by a bankruptcy judge. In the usual Chapter 7, there is no dividend to creditors and thus no reason for the bankruptcy court to rule on the enforceability of a claim, outside of an adversary proceeding to obtain a hardship discharge.