Too many people have misconceptions about the process of filing for bankruptcy and these misconceptions can lead to some costly mistakes and missed opportunities.

For example, if you are struggling with debt including student loans, you may think you can’t have those debts discharged if you file for Chapter 7 bankruptcy. While this may certainly be true in some cases, there are instances where people can and do have student loans discharged.

According to a report published in 2011, roughly 40 percent of people who include student loan debts on their bankruptcy filings are able to have it discharged either partially or in full. This may come as quite a surprise to people who assumed that student loan debt is never included in a filing for bankruptcy.

In order to determine if this type of debt can in fact be discharged, however, you will need to confirm that the obligation to repay the educational loan will cause undue hardship. This doesn’t just mean that it will be difficult and cause financial strain to repay the loan. Many courts will only consider this type of debt dischargeable if it meets the requirements of the Brunner test which means:

  1. Debt is resulting in a person having to live below a minimum standard of living
  2. A person’s financial resources and stability are unlikely to change in the future
  3. The person has made good-faith efforts to repay loans

In the event that you and your student loan debt meet these criteria, it is possible that the courts will discharge some or all of it when you file for bankruptcy.

Most people who take on debt, especially in the form of student loans, have every intention and hope of paying off that debt. However, thanks to skyrocketing costs of education and the difficulties of the job market right now, many students are getting hopelessly buried under debt before they can even secure an adequate job.

Whether you are eligible to have student loans discharged or not, you may want to seriously consider the options for bankruptcy. Even if all your debts are not discharged through Chapter 7 bankruptcy, it can relieve some of the financial burdens you may be carrying. Discussing your options with an attorney can be crucial in finding a solution that is best for your situation.