Student Loan Debt In Bankruptcy

News has been circulating that student loan debt may soon be next for financial relief for struggling Americans. The appropriate method for providing student loan debt relief has been a focus of controversy for quite some time; but, has recently sparked the conversation again as millions face financial hardship in recent months. This has many people asking:

Can bankruptcy eliminate student loan debt?

The short answer is maybe.

Certain situations can eliminate student loans through bankruptcy. The most common of these situations is total and permanent disability, but other situations can also qualify. Undue hardship is the basic qualification for discharging student loans through bankruptcy.

• There must be undue hardship. The undue hardship standard is a difficult one to meet. There are many situations where it is difficult for a borrower to meet the undue hardship standard, but they can be met under certain circumstances.The courts have created specific tests that must be met in order to meet the undue hardship standard.
  • The four basic tests for undue hardship are: 1) You cannot maintain a minimal standard of living if you are required to repay the loans; 2) You made good faith efforts to repay the loans; 3) You have made a good faith effort to look for work; and 4) You cannot maintain a minimal standard of living if you are required to repay the loans. Depending on the facts and circumstances of your case, you may be able to show undue hardship.

What if my income is above the “median family income?”

The courts have ruled that the undue hardship standard is the same for both mean and median income standards. In other words, the median family income is the point where 50% of the state’s families earn above the median and 50% earn below the median.

To learn more about how bankruptcy can eliminate some student loan debts, contact our Roseville bankruptcy attorney today.