It's Next to Impossible to Discharge Student Loans When Filing Bankruptcy


Over the last 10 years, there has been a new bubble being created right under our noses. As Americans, we put a higher priority on getting an education and along with that come student loan debt. Most Americans can't afford to pay for college without borrowing money. As the cost of a college education continues to rise many of these loans are becoming unsustainable. The average college student graduates with $27,000 in debt. While this does not sound like a large sum of money, you have to remember that this group of people has not even found a job yet. As interest is compounding, so is the debt increasing. Looking at people that go to the more expensive schools, it's common to see $100,000 in school loans. It seems pretty obvious that we're setting our young adults up for failure. The sad thing is filing bankruptcy to eliminate this debt is not even an option for these young adults.

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Recently, there have been many twenty-somethings that are filing for bankruptcy because of unemployment, student loan debt and credit card debt. The downside is filing bankruptcy will not eliminate most likely the largest portion of that debt which is their school loans. This is something they will be saddled with for their entire life. Asking around, there are many middle-aged doctors that make a decent living and still are paying their school debt. It seems to me there is a bubble being created as large as the mortgage crisis, if not larger. At the end of 2011, it was reported that the student loan debt nationwide was closing in on $1 trillion. This is more than the credit card debt for the entire United States. I think it's time that Congress gives this a look.

With changes to the bankruptcy code back in 2005, it is now easier to get a bankruptcy discharge on federal and state income taxes than it is to discharge private student loan debt. There must be a huge lobby in Washington DC for the student loan creditors to have this happening. Maybe it's time for Congress to go back to the drawing board with the changes made to the bankruptcy code in 2005. Since the economy has changed drastically it should be easier to file for bankruptcy than harder. Many Americans are suffering, especially those that have outstanding student loans.

When someone is filing bankruptcy, to include student loans in a bankruptcy discharge, the bankruptcy lawyer will have to show undue hardship to the bankruptcy court. Not only does the debtor have to prove that they are unable to make the payments on their school loans and maintain a minimal standard of living, it requires the individual filing bankruptcy to show they are making an effort to pay these loans and prove the circumstances that would show the debtor would never be able to pay these loans in the future. Usually, the only people that will get a bankruptcy discharge on this kind of debt is a person that has a debilitating illness or one that was in an accident that left them disabled for life. Even with the best bankruptcy lawyer this is a really tough one to get through as the bankruptcy law stands.

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