Student Loan Debt and Bankruptcy
Posted on Thursday, June 19th, 2014
Student loan debt is a growing problem for many American students. Recent figures show figures topping an estimated $730 billion in outstanding federal and private student-loan debt. On top of that staggering number, only about 40 percent of this debt is actively being repaid. This crushing debt is having a disastrous effect on many students and recent grads. A medical school graduate in 2003 with $250,000 in student loan debt may, after several deferred loan payments, compounding interest rates and default charges, now owe a staggering $555,000. This is an extreme case, but sadly not uncommon.
Why Is Student Loan Debt So High?
Tuition is on the rise, causing many students to borrow not only to pay for school but also to pay for living expenses, even if they work part-time throughout school. Student loans are a special kind of debt, often seen as “good debt” because an education can lead to a higher salary.
Unfortunately, student loan debt, however “good” it may seem, is still debt and should be cautiously approached. Student loan debt is also not like most other type of debt. Student loans can, for example, be very difficult to pay off. Homeowners can default on a mortgage and return the house keys to a lender, while others in major credit card debt can file bankruptcy. Student loan debt, however, is virtually impossible to get rid of, especially once a collection agency gets involved. Although lenders may trim payments, getting fees or principal waived rarely happens.
Can I Discharge Any Student Loan Debt?
Despite the extreme difficulty of discharging student loans through bankruptcy, it is possible. To do so, you must show that payment of the debt “will impose an undue hardship on you and your dependents.” The Brunner Test, for example, is often used in this instance, and can help you successfully prove your hardship. Once you feel you can prove your hardship, it is important to file an adversary proceeding petition either with or as an amendment to your bankruptcy case.
Bankruptcy is not the only way to alleviate the pressures of student loan debt. If you are serious about combating your student loan debt, be sure to seek the aid of specialized bankruptcy lawyers, like those at Amerio Law Firm in Sacramento. The experienced lawyers at Amerio Law Firm can help you navigate the tricky world of debt relief, offering information on both bankruptcy and non-bankruptcy options. With your future financial health at stake, it is imperative to call upon the expert advice of experienced bankruptcy lawyers. Call Amerio Law Firm today for a consultation.