Will Bankruptcy Cover Your North Carolina Student Loan Debt? Skip to main content

You are here

Will Bankruptcy Cover Your North Carolina Student Loan Debt?


[image source: Pixabay:

According to the North Carolina Department of Justice, more than 60 percent of North Carolinian students graduating from private or public schools have student loan debt. 

North Carolina is ranked 37th in the United States for student loan debt, but 2nd nationwide for student loan debt growth between 2008 and 2018. More than 1.2 North Carolinians hold $44 billion of the country's $1.5 trillion student loan debt

On average student loan borrowers in North Carolina owe more $26,164 per person, and more than a quarter of those who owe have postponed significant life events, such as getting married or starting a family. Furthermore, half have held off on buying a home or starting retirement funds.

The default rate on North Carolina student loan debt stands at just over 10%. Being in default can lead to serious consequences, including garnishments on tax refunds, Social Security benefits, or wages, in addition to dramatically lowered credit scores.

So how can you get out from under student loan debt in North Carolina?

Does bankruptcy cover student loan debt?

The majority of consumer debt can be discharged in Bankruptcy. Covered debt includes costs related to:

  • Homes
  • Cars
  • Medical bills
  • Credit card debt
  • Personal loans

However, a handful of debt types aren't eligible for discharge, except in very rare instances. These include:

  • Child support
  • Alimony
  • Tax obligations
  • Fines 
  • Fraudulent debt
  • Student loans 

How to get student loan debt discharged through bankruptcy

At the law offices of John T. Orcutt, we often hear the question, "How can I get student loan debt discharged through bankruptcy in North Carolina?" from former students of Raleigh and Greensboro universities.

The fact is, you must be able to prove to the satisfaction of the Court that you have a legitimate hardship that is so severe that you cannot possibly pay back your student loans, now or even in the future. 

It's almost unheard of for someone without a lawyer to be able to get their bankruptcy to include student loan debt. However, with proper representation, you may be able to leverage one of the few instances in which student debt can be brought under the umbrella of a bankruptcy case:

Severe and readily documented medical problems 

If you can establish that you are physically and/ or mentally incapable of earning an income that would sustain payments for student loans, you may be able to get them discharged in a bankruptcy filing. 

To do so, you will be required to present acceptable testimony from one or more reputable medical providers, substantiating your claim. This is the most commonly won argument for discharging student debt through bankruptcy.

Extreme economic circumstances

Do you have a substantial student loan debt? Have you tried diligently to repay it for a significant number of years but experienced repeated issues trying to find (and retain) full-time work? You might be able to get a judge to discharge your debt.

In these relatively rare cases, debt is typically discharged if you have a predatory interest rate (i.e., exceptionally high). If you've made a long-term good faith effort - especially if your debt has not significantly decreased because of the amount of interest included in payments - this will also be taken into account.


If you have reached retirement age, and still have a high amount of debt – (think six figures) – you might find an empathetic judge. At that stage of your life, your hardship is unlikely to resolve for the rest of your repayment period. Additionally, you're probably not going to be able to change your circumstances dramatically. 

This is called "certainty of hopelessness," and it is easier to qualify under this criteria if you or a dependent also have a permanent disability, a significant physical or mental illness like cancer, or the beginning of a memory loss condition such as dementia.

If you think you have a hardship that may qualify you to discharge your student loan debt through bankruptcy, contact the law offices of John T. Orcutt, with office locations in  +1-919-646-2654, Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington and multiple other cities across North Carolina.

Debts Hurt! Got debt? Need help? Get started below!

What North Carolina County Do You Reside In?