BANKRUPTCY LAW

Bankruptcy law provides for the development of a plan that allows a debtor, who is unable to pay his creditors, to resolve his debts through the division of his assets among his creditors.

This supervised division also allows the interests of all creditors to be treated with some measure of equality. Certain bankruptcy proceedings allow a debtor to stay in business and use revenue generated to resolve his or her debts. An additional purpose of bankruptcy law is to allow certain debtors to free themselves (to be discharged) of the financial obligations they have accumulated, after their assets are distributed, even if their debts have not been paid in full.

State Bankruptcy Courts

Filing Bankruptcy

Have you lost a job or had your income reduced? Do you have unanticipated medical bills? Have your living expenses increased beyond what you need to make your normal minimum payments on your credit cards and other bills? The vast majority of people who need to file bankruptcy end up in that position through no fault of their own. That isn’t intended to mean that people who file aren’t responsible for their debts. They are. But the bankruptcy laws exist to enable people to get a “fresh start” when unexpected or unforeseen events occur to render them unable to pay their debts.

Discharging Student Loans in Bankruptcy

Eliminating or discharging student loans in bankruptcy is very difficult. For cases filed in the ninth circuit (which includes California), there is a three part test (know as the Brunner Test) which requires that the party seeking to discharge the student loans prove three things: First, that you cannot maintain, based on current income and expenses, a 'minimal' standard of living for yourself and your dependents if forced to repay the loans.

Second, that additional circumstances exist indicating that this state of financial affairs is likely to persist for a significant portion of the repayment period of the student loans.