The Difficulties of Discharging Student Loan Debt With Bankruptcy

Recently, President Obama proposed the idea of making student loan discharge through bankruptcy easier for millions of people who can’t make their payments. Soon after, thirteen U.S. Senators introduced the Fairness for Struggling Students Act of 2015 which places private student loans on the same level as other forms of consumer debt. Although less than 10 percent of loans are with private lenders, talking about making student loans more eligible to discharge in bankruptcy is a step-forward for many drowning in debt. This discussion is especially pressing because student loans are only behind home mortgages as the largest source of consumer debt in the U.S. There is even more student loan debt than that with credit cards. Unfortunately, right now individuals have few options for forgiving their debts; in many cases bankruptcy is out of reach. Why? The court can decide whether or not to discharge the debt based on “undue hardship” — a standard that is not well-defined and hard to prove. One threshold for undue hardship often considered is whether or not the loan payments prevent you from having a minimal standard of living and if this is unlikely to change in the future. Because getting your loans discharged through bankruptcy is so difficult and the law is complicated, having a lawyer represent you is particularly important. Even if you are just considering bankruptcy with student debt, a lawyer can help you determine if it is even an option. There may be hope in the future for more student loan debt relief in the future. But if the burden is too overwhelming right now, contact us and we will discuss what course of action you should take.