As we reported recently, student loan debt is becoming increasingly burdensome for many Americans, as the national debt balance sits at more than $1.2 trillion, surpassing credit card debt.
Sadly, student loans are very hard to discharge through bankruptcy—although that has not stopped some people from attempting to include them in their filing. Recently, the Erie Times-News reported that a woman who lives on $1,100 per month as a customer service representative and who receives food stamps is attempting to have her loans discharged.
According to the newspaper, Mary Morgan attended college in 1993, receiving a business management associate’s degree. She reportedly graduated with more than $11,800 in student loan debt. Over the next 20 years, she struggled to repay the debt, as she lives in poverty. Sadly, the debt has now doubled because of interest rates.
Morgan filed for Chapter 7 bankruptcy recently, asking a judge to dismiss the student loan debt. However, as the Times-News reported, she will have an uphill fight because of the way the U.S. Bankruptcy Code is currently structured.
Unfortunately, to have student loan debt discharged in bankruptcy, a debtor must show that his or her financial situation is not likely to improve over the course of his or her life. Morgan hopes that she will be able to prove that her student loan payments are an “undue hardship”, which is the sole exemption in the bankruptcy code that allows for discharge.
If you are struggling with student loans and have questions about including them in your bankruptcy, I can determine the best way to move forward with your case. Remember, the legal guidance you receive during your bankruptcy could end up saving you a surprising amount of money.
How Can a Bankruptcy Help Me with My Student Loans?
It is rare that a bankruptcy court will allow a debtor to discharge student loans. However, it can occur—to have loans discharged, some courts use the Brunner test to determine standards of living and repayment options.
It is our hope that as more news comes out about how student loan debt is harming the economy, laws will be enacted, making the debt easier to discharge in bankruptcy.
Recently, a report in US News and World Report said that less than 1 percent of people with student loans included them in their bankruptcy proceedings, as the standard for discharge is so hard to meet. However, it was reported that of the people who did include them in their bankruptcy, 40 percent had a portion or all of their loans discharged.
Keep in mind, if you are struggling with student loan payments, a Chapter 7 bankruptcy allows for the discharge of other debts like credit cards and medical bills. The elimination of these debts can make student loan payments easier for a borrower. Additionally, there are ways to work with your lenders to lower your payments, like mediation.
Law Firm of Kevin D. Judd – Maryland and Washington DC bankruptcy attorney
Judd’s Judgment: Since 2008, student loan debt is the only form of consumer debt that has grown nationally.