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Should You Include Student Loans in Your Bankruptcy Filing? You Might Be Surprised

You’ve got nothing to lose by looking into the prospect of having your student loans erased through bankruptcy. For many people, both students and elderly persons who may have co-signed loans for young relatives, student loan debt is a debilitating burden.

Unfortunately, there is a widespread belief that it is impossible to discharge student debts in bankruptcy, which experts believe is preventing many people from receiving much-needed debt relief.

In actuality, certain types of student loans can be discharged in certain circumstances. According to one survey, around 40% of student loan discharge attempts are successful. However, according to the same study, only 0.1 percent of people who filed for bankruptcy included their school loans in their debt reduction plans. Keep reading to learn more and then contact The Law Offices of Paul Y. Lee at 951-755-1000 to request a free consultation with a bankruptcy attorney.

Don’t be one of the 99.9% of people who file for bankruptcy and forget about their school loans

Instead, think about if your circumstances could allow you to discharge your student loans together with your other debts. After all, you might have a 40% chance of getting your student loan debts dismissed if you try. You will never get relief if you do not even attempt.

What are the advantages of discharging student loan debt?

In a bankruptcy process, student loan debts are treated differently from other types of debt. You will have to argue your case in an adversarial proceeding rather than merely filing paperwork and waiting for the court’s ruling. Most courts will use the Brunner test to determine whether your debts are causing you undue hardship and should be discharged.

The Brunner test asks the judge to evaluate whether you are unable to sustain a minimum quality of living due to your debt, for the most part, the financial difficulty will remain throughout the payback period, you have attempted to repay the obligation in good faith.

In circumstances when the debtor is unemployed or has a very low income and is experiencing some form of medical hardship, judges appear to be more inclined to rule in his or her favor.

Study of a recent case

A recent student debt bankruptcy case demonstrates that there is still hope for some people. After sending his three children to college, a 65-year-old man owed almost $240,000 in student loans. The man lost his job 14 years ago and now subsists on his wife’s $13,200 per year salary.

In 2012, the couple depleted their retirement savings and filed for bankruptcy. After four years of litigation, the Department of Education announced last month that the debts will be discharged through an out-of-court settlement.

Need help with bankruptcy?

Please call The Law Offices of Paul Y. Lee at 951-755-1000 for information on the possibilities of utilizing bankruptcy to discharge any type of debt, including credit card debt, medical expenses, payday loans, and even educational loans.