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Irvine Bankruptcy Lawyer / Student Loan Debt

College is expensive, and it is not getting any cheaper. At the same time, more and more people are turning to student loans as a way to finance their higher education, leaving them saddled with debt as soon as they leave college, whether they completed a degree or not. More than half of all college students today will exit with over $35,000 in debt, making student loan debt the second largest category of consumer debt in the United States, after mortgage debt. This is a huge load of debt for someone to carry and service at a time when they are just starting out in life, entering the workforce at the bottom rung while getting married, having kids, and buying a home.

It is no secret that student loan debt is a stressful burden hanging over the heads of thousands of individuals in the U.S., hurting their ability to get other credit and siphoning off their disposable income to service the debt. But can student loan debts get discharged in bankruptcy, or can bankruptcy help by relieving consumers of other forms of debt so they can afford to pay off their student loans without going broke in the process? Keep reading to find out how bankruptcy can be a lifesaver for people struggling with overwhelming student loan debt, and call The Law Office of Charles A. May for a free consultation with a knowledgeable and dedicated lawyer.

Student Loans Are Dischargeable in Bankruptcy

It is a commonly held belief that student loans cannot be discharged in bankruptcy, but this is simply not true. Student loan debt has long been dischargeable in bankruptcy for people who can show that being forced to repay the loan is an undue hardship. The problem is that, historically, it has been very hard to prove undue hardship, and the bankruptcy courts have interpreted this phrase very narrowly. That has been changing in recent years, and these days, about half of the people who try to get their student loan debt discharged in bankruptcy have some measure of success.

In the majority of bankruptcy courts, undue hardship is assessed according to a judicial standard known as the Brunner test. Basically, there are three things you have to be able to prove to establish undue hardship under the Brunner test:

  1. You are not able to pay your student loans while maintaining a minimal standard of living for you and your family
  2. Your current financial situation is expected to stay about the same during the period set out for repaying your student loans
  3. You have not been able to pay off your student loans despite making a good-faith effort to do so

If you meet the above criteria, you could possibly get your student loans eliminated in Chapter 7. If filing for Chapter 13, you should be able to adjust the amount you owe and only repay a portion through your repayment plan over three or five years, after which the remaining debt is subject to discharge.

Alternatives to Bankruptcy for Dealing With Student Loan Debt

Although bankruptcy remains a rarely used and only moderately successful means for getting rid of student loan debt, the likelihood of discharging student loans through bankruptcy is looking better every year. Keep in mind that other options might be available, including getting an extension of your loan, qualifying for deferment, negotiating an income-based or income-contingent repayment plan, or even seeking federal loan forgiveness. However, loan forgiveness is only open to certain people such as teachers or public service employees, and the other options might only draw out the time you have to pay off your loan without offering much in the way of permanent relief. It is good to have all your options on the table, though, and talk them over with a knowledgeable student loan bankruptcy attorney who can help you figure out the best approach given your unique circumstances.

Get Help With Student Loan Debt

Student loan debt is a huge problem for thousands of Californians, and Chapter 7 or Chapter 13 bankruptcy might be an effective way to deal with student loans and other forms of debt that are grinding down young families just when they are starting out. Get on track with a free consultation to understand your options and find the best path forward to deal effectively with your financial struggles. For help in Orange County, Los Angeles and Southern California, call The Law Office of Charles A. May to speak with a skilled and compassionate bankruptcy lawyer.

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