Recently, an article in The Atlantic discussed the mental and physical strain that excessive student loans can put on a person. The motivation for the article was a study conducted by the University of South Carolina, which noticed that loan debt could cause major stress and the feeling of physical and mental exhaustion. This study is important because the cost of higher education continues to rise.
According to a 2013 Northwestern University study, debt stress can lead to depression and higher diastolic blood pressure, which can make hypertension and strokes more likely to happen.
Now consider this study in regards to someone with major student loan debt that is going through with a Chapter 7 or Chapter 13 bankruptcy. Would filing for bankruptcy do anything to alleviate the emotional, physical and financial stress caused by their student loans?
While bankruptcy can set you up on a path towards financial security, it generally cannot release you from your obligation to pay your student loan debt. This is because it is a non-dischargeable debt.
However, some people have been able to discharge some of their student loan debt by proving “undue hardship.”
Do I Qualify for an Undue Hardship Loan Discharge?
If you are undergoing Chapter 7 or Chapter 13 bankruptcy, and you can prove that your student loan repayments have left you in a state of destitution, then there is a chance you can have some or all of your loans discharged. That is, the paying of the student loans have caused you “undue hardship.”
Your chance for a discharge is higher if your annual income is very low and if your student debt comes from a for-profit trade school. However, the first factor is the most important.
If you have a very low annual income, the “Brunner” test may be involved in deciding whether to discharge your loans or not. If the repayment of your loans is forcing you to live below the minimum standard of living, and it seems likely that it will continue to leave you destitute, then your loans may be totally or partially discharged if you can show that you made strong efforts to repay the loans.
How Do I Apply to Discharge My Loans in Bankruptcy?
To get started, you should probably talk to your local bankruptcy lawyer to see what your options are for easing your student loan situation. If a discharge seems possible, then you file a Complaint to Determine Dischargeability, which is a formal complaint given to the bankruptcy court. After that, you and your bankruptcy attorney will have to prove that continued payment of your student loans will cause “undue hardship” to you.
Check back with us again soon as we will discuss what happens if your student loans are not discharged in bankruptcy court. Additionally, follow us on Facebook and Twitter to see how we have helped people find solutions for their debt.
Law Firm of Kevin D. Judd – Maryland and Washington DC bankruptcy attorney
[Judd’s Judgment: A study by a Harvard Law graduate examined 207 bankruptcy proceedings and found that 39 percent led to a full or partial discharge of student loan debt.]