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Can Student Loan Debt be Discharged via Bankruptcy????

YES!!!!
 Well, it is not that simple. Student loan debt is in my opinion the most burdensome debt today. It is a necessary evil for many Americans. This is because most students who seek to go to college simply can’t afford to pay for school out of pocket. While many Americans live under the burden of student loan debt, it is my hope that this article gives many hope of a better alternative. Today I will discuss how student loan debt can be discharged via bankruptcy. Random factoid, did you know almost 1 trillion dollars debt in this nation comes from student loan debt. That’s why I wanted to know if student loan debt can be included in a chapter 7 bankruptcy.

In 2005 Congress signed the  Bankruptcy Abuse Prevention and Consumer Protection Act, congress stated that student loan borrowers would be required to file an "adversary proceeding" (a type of lawsuit with in a bankruptcy case) to prove undue hardship in order to get their loan forgiven.

Proving Undue Hardship

The only way a person will be able to prove undue hardship in a Chapter 7 bankruptcy is if they present these reason to the judge in a compelling manner:

1.     The debtor is less likely to be employed.

2.     The debtor is more likely to have a medical hardship.

3.     The debtor is more likely to have lower annual incomes the year before they filed for bankruptcy.

Also the debtor must prove;

1.     a current inability to repay the loans,

2.     a future inability to repay the loans, and

3.     a good faith effort to repay the loans.

In most of the country, bankruptcy courts use the Brunner test to decide if repayment would cause undue hardship. Under this standard, you can discharge your student loans if you meet all three of these factors:

1.     Poverty: Based upon your current income and expenses, you cannot maintain a minimal standard of living for yourself and your dependents if you are forced to repay your loans. A minimal standard of living is not a middle class standard, but a much lower standard of living. The courts expect you to maximize your income and minimize your expenses.

2.     Persistence: Your current financial situation is likely to continue for a significant part of the repayment period.

3.     Good faith: You have made a good faith effort to repay your student loans

Ultimately whether or not your student loan debt will be canceled falls to the judge, however, if you show the reasons above in the proper manner you will fair far better than most. 

Vulcan Legal Group can help evaluate your student loans. Call today for a free consultation. 205.202.5190

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