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When Bankruptcy is an Option for Student Loan Debt

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Student loan debt is a crisis in America. Americans owe a whopping $1.5 trillion due to loans to pay for their college education. The average borrower owes $28,650.

Many people have trouble paying off this debt. While the minimum wage has risen slightly in recent years, good-paying jobs are still hard to come by. After paying for housing, a vehicle, food and other necessities, there just isn’t any room in the budget to make a monthly payment of $400 or more.

Unfortunately, student loan debt cannot typically be discharged in bankruptcy, even though nearly one-third of bankruptcy filers do have student loan debt. Student loan debt can be discharged in rare circumstances, but it is best to look into other options.

Alternatives to Bankruptcy

Bankruptcy is a serious situation that can affect your credit for many years. You may lose your car, house and other assets. Therefore, consider some alternatives first.

Income-driven repayment plans are an option. Your payment is reduced based on income and family size. You could end up paying a lot less or even nothing at all.

Deferment and forbearance both allow you to delay payments for a temporary period of time. The difference is that in a deferment, you may not have to pay the interest that accrues during that time. You will have to in a forbearance. To apply for these, you simply have to fill out a form and provide proof of income.

How Can Student Loan Debt Be Wiped Out in Bankruptcy?

The only way to wipe out student loan debt in bankruptcy is to prove undue hardship. The trouble is that there is no definition for “undue hardship.” Therefore, it is up to the court to decide based on your situation. That’s why many courts use what is called the Brunner test. The Brunner test uses three criteria to determine undue hardship:

  1. Your financial situation is so severe that you cannot maintain a minimal standard of living for yourself and any dependents should you have to repay your student loan debt.
  2. There is little chance this financial situation will improve during your student loan repayment period.
  3. You have made an attempt to make payments on your student loan debt before filing for bankruptcy.

There are pros and cons to bankruptcy, so make sure it is right for you. Note that there are two types of consumer bankruptcy: Chapter 7 and Chapter 13. Bankruptcy can affect your credit for 10 years and even affect your employment, so make sure this option is right for you..

Contact a Coral Springs Bankruptcy Attorney

Bankruptcy is not something that should be taken lightly. It is a drastic move that can affect your credit for many years. If you are struggling with student loan debt, you should explore other options first before.

The Coral Springs bankruptcy attorneys at the Law Offices of Barry S. Mittelberg, P.A. can help you with debt relief and see if it is possible for your student loan debt to be discharged. Schedule a free consultation today. Call our office at 954-752-1213 today.

Resources:

finance.yahoo.com/news/file-bankruptcy-student-loans-142543505.html

forbes.com/sites/zackfriedman/2019/02/25/student-loan-debt-statistics-2019/#74630998133f

https://www.mittelberglaw.com/too-broke-to-be-bankrupt/

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