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Bankruptcy and student loans

Many people may not realize it, but filing for bankruptcy can help some people find relief from student loan debt.

In recent years, controversy has arisen over the amount of student loans that individuals must take out in order to complete their college or graduate degrees. In many cases, recent graduates find themselves saddled with significant debt and less than stellar career prospects. While some federal lawmakers have expressed a desire to pass legislation helping students and recent graduates, it does not appear that any solution is forthcoming. Fortunately, however, filing for bankruptcy is an option for those who have significant debt and are unable to make their student loan payments.

Despite what many people might think, student loan debt is, in fact, dischargeable in bankruptcy in some cases. Typically, bankruptcy courts apply what is known as the Brunner test, which was outlined in the case Brunner v. New York State Higher Educational Services Corporation. Under Brunner, individuals are allowed to discharge student loan debt if it presents an “undue hardship.” Student loan debt presents an undue hardship if the following conditions are met:

  • If a debtor is forced to repay his student loan, he would be unable to maintain a minimum standard of living for himself and his family;
  • There is evidence to suggest that this situation is likely to persist for a substantial portion of the repayment period; and
  • Significant efforts have been made by the debtor to repay the loan

Note that each one of these requirements must be met in order for student loan debt to be considered an undue hardship.

While it may seem easy enough to meet these requirements, in practice, it can be a challenge. That is not to say that it is effectively impossible to discharge student loan debt, but rather that the process can be an uphill battle, depending on the circumstances.

The reality is that a growing number of young people are graduating from college with debt significant enough to make it difficult to make ends meet. This is particularly true as our nation’s economy continues its slow recovery. While lawmakers debate possible solutions, filing for bankruptcy remains the best option for many people to make a fresh financial start.

If you are struggling to make your student loan payments, remember that you have options. Schedule a meeting with an experienced bankruptcy attorney today to learn more about the bankruptcy process and whether filing is right for you. Do not delay, speak to an experienced bankruptcy attorney today.

Keywords: Bankruptcy, student loan debt