Wiping out student loans in bankruptcy.

It can be said that there is a generally held idea among legislators and ‘decision-makers’ that college graduates may be more likely than most to abuse the bankruptcy system. I say this because the standard for discharging student loans is higher or more difficult than the standard employed to discharge most other unsecured debts. Avoiding student loans through bankruptcy poses a difficult challenge, but it is not impossible.  To discharge or avoid full repayment of your student loans in bankruptcy, you must prove to the court that payment of the debt “will impose an undue hardship on you and your dependents.”Of course there is no one size fits all standard that will work in every jurisdiction but the general standard usually requires that repayment of the debt tends to cause an unreasonable or unjust economic burden on you and your family. However common factors or questions considered by the Court include: (1) whether the debtor can or cannot maintain, based on current income and expenses, a “minimal” standard of living for the debtor and the debtor’s dependents if forced to repay the student loans; (2) what additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) has the debtor made good faith efforts to repay the loans? The applicability of these factors may vary. As a practical matter other factors for consideration include: Are you employed in your field of study? What is the average salary in this field? How does this salary relate to your current and long-term expenses? Is your alma mater an accredited institution of higher learning? If not, when did the institution lose its accreditation? The foregoing list is not comprehensive but it is insightful to the types of factors a court will consider in assessing whether an undue hardship exists. If a court finds that repayment of your student loan causes an undue hardship, your student loan will be completely canceled. Keep in mind that although it is not impossible to discharge your student loans in bankruptcy the task is not simple and in most cases you will seek to restructure or repay an arrearage on the student loan debt rather than simply wiping out the debt altogether. Additionally, there are many factors to consider when making the decision about filing bankruptcy and as such you should seek advice from a qualified legal professional before making a decision to file.