Bankruptcy Myths About Student Loans
Separating Fiction from Fact to Make Informed Decisions
At The Independence Law Firm, we hear the same myths repeated daily—myths that keep people trapped in student debt for decades when freedom might be just months away. These misconceptions, spread by well-meaning friends, outdated internet articles, and even some attorneys, prevent thousands from seeking the relief they deserve. Let’s destroy these myths with facts.
Myth #1: “Student Loans Can Never Be Discharged in Bankruptcy”
The Destructive Lie
This is the most damaging myth in bankruptcy law. It stops people from even trying, condemning them to decades of financial struggle.
The Actual Truth
- Federal law specifically allows student loan discharge
- Requires proving “undue hardship”—a achievable standard
- Thousands of loans discharged annually
- 2022 guidance made it easier
- We discharge loans regularly
Why This Myth Persists
- Old information gets repeated
- General bankruptcy attorneys don’t specialize
- Success requires expertise
- Media loves dramatic stories
- Creditors benefit from the myth
Myth #2: “You Must Be Permanently Disabled”
The Misconception
Many believe only quadriplegics or terminally ill patients qualify for discharge.
The Reality
Many Non-Disabled Clients Succeed:
- Age alone can qualify (limited working years)
- Chronic conditions that limit work
- Mental health conditions
- Economic hardship
- Failed career investments
Real Examples:
- 58-year-old retail worker: Discharged
- Single mother of three: Discharged
- Unemployed MBA graduate: Discharged
- Teacher with anxiety: Discharged
Myth #3: “You Can’t Own Anything”
The Fear
People think bankruptcy means losing everything—home, car, retirement, dignity.
The Facts
What You Keep in Bankruptcy:
- Home (with equity exemptions)
- Car (within limits)
- Retirement accounts (fully protected)
- Personal belongings
- Tools of trade
- Most everything you own
The Reality: 95% of our clients keep everything they own
Myth #4: “It Will Ruin Your Credit Forever”
The Misunderstanding
People think bankruptcy means permanent credit destruction.
The Timeline Truth
Chapter 7: On report for 10 years but:
- Major impact only 2-3 years
- Can rebuild to 700+ in 24 months
- Better than struggling forever
Chapter 13: On report for 7 years but:
- Shows responsibility
- Can get credit during plan
- Faster full recovery
The Comparison
With Student Loans: Bad credit forever from high debt ratio With Bankruptcy: Temporary impact, then recovery
Myth #5: “You Need Perfect Payment History”
The Impossibility Standard
People think they must have tried everything and paid consistently.
Good Faith Reality
What Actually Counts:
- Any attempt to pay when able
- Seeking deferments/forbearances
- Communicating with servicers
- Living responsibly
What Doesn’t Disqualify:
- Never having money to pay
- Strategic default
- Prioritizing family needs
- Not knowing all options
Myth #6: “Private Loans Are Harder to Discharge”
The Backward Belief
Many think private loans have stronger protection than federal.
The Surprising Truth
Private Loans Often Easier Because:
- Fewer defenses for lenders
- Chain of ownership issues
- Documentation problems
- Less sophisticated opposition
- Courts more sympathetic
Success Rates: Often higher than federal loans
Myth #7: “You Must Be Below Poverty Level”
The Subsistence Myth
People think they must be homeless or starving to qualify.
Reasonable Living Standards
Courts Consider “Minimal” to Include:
- Safe housing
- Reliable transportation
- Adequate food
- Healthcare access
- Basic communication
- Family needs
Middle-Class Hardship Qualifies: You don’t need to live in poverty
Myth #8: “Trying and Failing Makes Things Worse”
The Paralysis Problem
Fear of making things worse keeps people from trying.
Why This Is False
Failed Attempt Doesn’t:
- Increase what you owe
- Damage your credit more
- Prevent future attempts
- Create new penalties
But It Does:
- Show good faith effort
- Build your record
- Sometimes lead to settlements
- Start important conversations
Myth #9: “You Can Only File Once”
The One-Shot Myth
People think they get one chance at discharge.
Multiple Paths to Relief
- Can file Chapter 7, then 13
- Can re-file if circumstances change
- Can appeal decisions
- Can try different strategies
- Settlement opportunities ongoing
Myth #10: “Income-Driven Plans Are Better”
The Trap Disguised as Help
IDR plans seem easier than bankruptcy.
The Hidden Problems
IDR Reality:
- 20-25 years of payments
- Growing balances
- Tax bomb at end
- Constant recertification
- Life on hold
Bankruptcy Benefits:
- Resolution in months
- No tax consequences
- Freedom to rebuild
- Certainty of outcome
Myth #11: “Bankruptcy Means You Failed”
The Shame Factor
Cultural stigma keeps people suffering silently.
The Success Story Reality
Bankruptcy Is For:
- Honest people in bad situations
- Victims of predatory lending
- Those whose careers didn’t pan out
- People choosing family over debt
- Smart financial strategists
Famous Bankruptcies: Abraham Lincoln, Walt Disney, Donald Trump—all used bankruptcy strategically
Myth #12: “Lawyers Who Say It’s Impossible Must Be Right”
The Expertise Problem
General bankruptcy attorneys often repeat myths.
Why They’re Wrong
Most Bankruptcy Attorneys:
- Don’t specialize in student loans
- Find these cases too complex
- Haven’t kept up with changes
- Prefer easier cases
- Lack necessary expertise
The Independence Law Firm Difference: We ONLY do student loan discharge
Regional and Cultural Myths
“In My State, It’s Impossible”
Truth: Federal law applies everywhere. We practice in all 50 states.
“My Community Says It’s Shameful”
Truth: Taking care of your family is honorable. Suffering needlessly isn’t noble.
“My Parents Say Just Keep Paying”
Truth: Previous generations had different costs, opportunities, and loan terms.
The Cost of Believing Myths
What Myths Have Cost You:
- Years of unnecessary payments
- Delayed home ownership
- Postponed retirement savings
- Relationship stress
- Career limitations
- Life opportunities
What Truth Offers:
- Real possibility of discharge
- Clear path forward
- Expert guidance
- Hope for future
- Actual solutions
Red Flag Myths from Creditors
“Work With Us Instead”
Translation: Keep paying forever
“Bankruptcy Won’t Help”
Translation: We don’t want you to try
“You’ll Lose Everything”
Translation: We’re trying to scare you
“No Lawyer Will Take Your Case”
Translation: Find a specialist
How to Spot Myths
Myth Indicators:
- Absolute statements (“never,” “always”)
- Old dated information
- No recent examples
- Source isn’t specialist
- Benefits creditors
Truth Indicators:
- Nuanced explanations
- Recent case examples
- Legal citations
- Specialist knowledge
- Your interests first
The Biggest Myth of All
“It’s Not Worth Trying”
This myth keeps people trapped for life. The truth? You won’t know what’s possible until you consult with specialists who actually discharge student loans.
Every Day You Wait:
- Interest accumulates
- Options may diminish
- Life passes by
- Stress compounds
- Freedom delays
Your Myth-Free Consultation
What We’ll Do:
- Assess your actual situation
- Explain real law, not myths
- Show similar success cases
- Give honest probability
- Outline your options
What We Won’t Do:
- Repeat myths
- Give false hope
- Make guarantees
- Waste your time
- Judge your situation
The Truth Will Set You Free
At The Independence Law Firm, we’ve built our entire practice on the truth: student loans CAN be discharged in bankruptcy. We’ve proven it hundreds of times. Don’t let myths keep you from exploring your options.
Contact us today for a myth-free consultation based on current law, recent cases, and real possibilities. The truth about student loan discharge might be the best news you’ve heard in years.
