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Russell G. Small

The difficulty of discharging student loans in bankruptcy

Some people in Connecticut may be struggling with substantial student loan debt. The total student loan debt nationwide is $1.59 trillion. Unfortunately, student loan debt is rarely dischargeable in bankruptcy.

There are a few options for debt relief, particularly for people who have federal student loans. Some people may be able to get a forbearance or have the loans deferred, which would allow them to take a break from paying them. Applying for an income-driven repayment plan is another option. These may not be available for a private student loan, but the lender might be willing to negotiate.

A person who decides to try to discharge student loans through bankruptcy will first need to qualify for Chapter 7 bankruptcy, which liquefies debts instead of reorganizing them as a Chapter 13 does. Eligibility for Chapter 7 is determined by income. However, this is just the first hurdle. The Brunner Test is applied next. This requires that the applicant demonstrate a genuine effort to repay the debt. Furthermore, they must show that they can't pay the debt while maintaining a reasonable standard of living and their financial situation is unlikely to change for most of the repayment period. Courts have a good deal of latitude in interpreting what counts as a reasonable standard of living, and this can make fulfilling the condition difficult.

People who have student loan debt can still file for bankruptcy even if they can't discharge their student loans. A few other types of debt, including taxes and child support, also cannot be discharged. However, discharging credit card debt or medical debt can make it possible to pay off other debts. There can be advantages to filing for bankruptcy, and it can offer a fresh financial start. While it does affect the filer's credit score, it is possible to begin rebuilding credit after filing.

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