Do you think bankruptcy can be a worthy option to free you of the student loan burden?

Rarely will you find any debtor saying that bankruptcy is an easy procedure but in case of dissolving student loan debts, it is notoriously tough. Although it is not impossible to discharge private and federal student loans via bankruptcy but you have to provide proof of undue hardship that can’t be solved by any means. Around 4 among 10 Americans who filed for bankruptcy could discharge their student loans and still 0.1% of the educational loan borrowers attempted to file bankruptcy, according to a new study by American Bankruptcy Law Journal.

Is it feasible to discharge student loans through bankruptcy?

Just as you can take out online loans from lenders like 24Cash to consolidate your high interest unsecured loans, doing away with your student loan debt burden is not that easy. That doesn’t mean that you can’t discharge them through bankruptcy but the process that you have to go through is rather too difficult. You need to comprehend the requirements for qualifying. As mentioned earlier, only 0.1% of the loan borrowers who declare bankruptcy can get their loans discharged and among them just 40% succeed.

Proving ‘undue hardship’ – What situations qualify?

As per the bankruptcy law, it is not clear as to what qualifies for ‘undue hardship’. Kantrowitz had said that Congress didn’t take the trouble of defining what undue hardship meant and hence it left it to the court to decide. Bankruptcy courts can leverage two tests to determine whether or not the student is actually going through any hardship – the Brunner Test and Totality of Circumstances test.

As per the Brunner test, the student requires proving the following things:

  • Based on the present income and expenditure, the student is not able to maintain a minimum living standard for his own self and also for his dependents if he is coerced to repay the loan.
  • Added situations that already exist and that indicate that this state will continue throughout a noteworthy time period of the student loan repayment period.
  • The student has made earnest efforts in paying back the loans but he couldn’t.

Pursuing discharge of student loans via bankruptcy

As the entire procedure is extremely tough, it’s worth getting in touch with a lawyer who can tell you whether or not it’s a possibility in your case. Though you may think that you meet the requirements of proving your ‘undue hardship’, yet you have to know that discharging student loans can include added work on top of normal bankruptcy proceedings. Moreover, bankruptcy can damage your credit score and bar you from getting future lines of credit. 24Cash Bankruptcy Guide offers you the best tips on building credit post bankruptcy but being a student, you should think twice before filing it. In a nutshell, discharge of student loans in bankruptcy is pretty rare and hence it is a better option to understand the alternative options to tackle your debt in a manageable manner. You may sign up for an income-driven repayment plan or try our forbearance or deferment as these are less challenging options than bankruptcy.

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Tim Spafford

Tim Spafford

Tim is a student who works hard to get a degree in finance and build a successful career in business consulting. Being a student and living in London Tim has a real-life experience in budgeting, saving, money making, traveling and having fun.