These days, college degrees don’t come without strings. For some just out of college, student loans may comprise a great deal of their debt and are the hardest to commit to paying back once a mortgage and family enter the picture. But due to the high rate of default in recent years, the federal government has taken aggressive action to collect on those debts, as they now provide the lion’s share of student loans. As a result of these new actions, most student debt is not dischargeable under Chapter 13 or Chapter 7 bankruptcy. Conyers bankrutpcy attorneys can provide you with further information.
So, what to do about lagging student debt if you are considering bankruptcy? There are always exceptions to every rule and student loans are no exception. The trustee assigned to your bankruptcy case will review your documentation in light of the government’s guidelines and determine if exempting these loans from bankruptcy will put “undue hardship” on you or your dependents. Your position must pass three tests for exemption:
1. Will exempting these debts from discharge create an “undue hardship” on the debtor’s income? In other words, will exempting these debts from discharge cause the debtor to be unable to provide food and shelter for his or her family to a minimum standard?
2. Is it fair to assume that the income of the debtor is likely to remain at a level that makes the previous statement true for the majority of the repayment period of the loan? In other words, is the debtor’s income likely to soar in say, a year or so, making future repayment of the loan more than possible?
3. Has the debtor made a good faith effort in the past to repay these loans? Did the debtor at least try to pay off his or her student loans in a timely manner in the past? Is the inability to pay a brand new event?
If student debt makes up a large part of your bankruptcy action, you must provide proof at the time of filing that you cannot make the student loan payments at the present and that you do not anticipate to be able to do so in the future. You must apply for a “hardship discharge” for these debts before your other debs have been discharged.
For further guidelines regarding the discharge of student loan debt and more information about student loans, you can contact Conyers bankruptcy attorneys. Guidelines for the discharge of education debt are not part of the Bankruptcy Code and the decisions on these are left up the bankruptcy courts in the individual states and to the experience of the trustee assigned to your case.