Student loans are the second highest debt category for consumers. Only mortgages surpass this. However, student loans usually can’t be discharged in bankruptcy. The reason for this is that a person has to pass the Brunner test if they are going to have the student loans forgiven through bankruptcy.
The Brunner test determines whether a borrower is unable to afford to pay the loans because of extenuating circumstances that are causing financial hardship and whether the circumstances are going to continue throughout the term of the loan. It also considers whether the buyer has made efforts in good faith to repay the loans. These conditions as interpreted by the courts are almost impossible to meet.
Even though bankruptcy may not discharge the student loans it can still be very helpful. Chapter 7 will at least relieve you of most of your other debts so you can concentrate on the student loans. Filing Chapter 13 would mean you wouldn’t pay directly on the student loans for the next 3 to 5 years although they would still be there when the bankruptcy is completed.
Some argue that allowing student loans to be discharged in bankruptcy will encourage people to get them even though they know that they won’t be able to pay them off. Others argue that everyone should be able to get a higher education.
One thing is certain: The student loan crisis in this country is spiraling out of control and needs to be addressed in a way that will put consumer interest first. Some politicians are introducing legislation that would result in the cancelation of $1.6 trillion in student loan debt or provide other forms of relief. To learn more about the student loan crisis and what can be done we suggest you visit the website www.studentdebtbomb.com which is sponsored by the National Association of Consumer Bankruptcy Attorneys. We belong to that organization.
Please call to schedule a free, initial consultation with our office to learn your options.