Maryland Bankruptcy Law: Can You Eliminate Student Loan Debt?

Maryland bankruptcy law presents specific guidelines for individuals grappling with overwhelming debt, including student loan debt. A common question among those seeking relief is whether bankruptcy can effectively eliminate student loans. The answer is complex and requires an understanding of both federal law and Maryland's specific regulations.

In general, student loans are treated differently in bankruptcy proceedings compared to other types of unsecured debts. Under both Chapter 7 and Chapter 13 bankruptcy, student loans are typically non-dischargeable. This means that simply filing for bankruptcy will not erase your obligation to repay your student loans. However, it is possible to have student loan debt discharged in rare circumstances.

To seek the discharge of student loans in Maryland, borrowers must demonstrate “undue hardship.” This standard can be difficult to meet, and the definition of undue hardship varies by court. Most jurisdictions utilize the “Brunner Test,” which assesses three key factors:

• The borrower cannot maintain a minimal standard of living for themselves and their dependents if forced to repay the loans.
• There are circumstances indicating that this state of affairs is likely to persist for a significant portion of the repayment period.
• The borrower has made good faith efforts to repay the loans.

If you can prove undue hardship, the court may discharge your student loans, but few cases meet this stringent standard. It is advisable for borrowers to consult with a bankruptcy attorney who can evaluate their specific situation and help determine the best course of action.

Additionally, Maryland has its own specific rules regarding bankruptcy filings. If you choose to file for Chapter 7 bankruptcy, you must pass a means test that assesses your income compared to the median income in Maryland. Those who do not qualify may consider Chapter 13 bankruptcy, which involves creating a repayment plan over three to five years. While Chapter 13 does not eliminate student loan debt, it may allow borrowers to manage their loans more effectively alongside other debts.

It is also worth noting that federal student loan forgiveness programs might offer alternatives outside of bankruptcy. Programs such as Public Service Loan Forgiveness (PSLF) provide avenues for borrowers working in public service to have their student loans forgiven after making a certain number of qualifying payments.

In conclusion, while Maryland bankruptcy law does not allow for the straightforward elimination of student loan debt, options exist for borrowers facing undue hardship or considering restructuring their finances through bankruptcy. It is crucial to seek professional legal advice to explore your options and make informed decisions about managing your student loans.