Federal Loan Basics

• In the past, a debtor could simply prove financial hardship to get his federally-backed student loans discharged in bankruptcy. But, bankruptcy law reforms passed in 2005 make it very difficult for Georgia residents to include their federally-issued student loans in Chapter 13. However, student loans issued through private lenders can, in most cases, be included in a Georgia resident's Chapter 13 plans.
  
  

Medical Exceptions

• In the past, receiving disability benefits was enough proof to reduce or eliminate government-backed student loans, according to the book "How to File for Chapter 7 Bankruptcy." But the burden of proof is much higher now. Unless you prove to a bankruptcy judge that you have a serious and permanent disability that makes it hard for you to support yourself and your family members, count on fully repaying your federal student loans.
  
  

Other Potential Exceptions

• If your college went out of business, you can include even federal student loans in your Chapter 13 case. If you were admitted to a college without a high school equivalency diploma and were not given an academic placement test, a Georgia bankruptcy judge may rule that your government student loans are invalid. The same rule applies if your college committed fraud to get your student loans. You must be able to prove such situations with witnesses or legal documents.
  
  

Additional Ineligible Debts

• No matter how disabled you might be, Chapter 13 will not touch some of your other "priority" debts, warns the State Bar of Georgia. Child support, alimony and court fines are not matters for your local bankruptcy court. If you owe taxes that are less than three years old, you also cannot deal with these in the bankruptcy courts. The same principle applies if you were sued by another person for criminal activities such as vandalism, arson, assault, fraud or drunken driving. You cannot reduce those judgments through Chapter 13. Bankruptcy laws also do not apply to future debts or debts you incurred right before bankruptcy. Also, if you lied about your income to get credit and the lender calls you on it, you cannot reduce those debts under Chapter 13.