Is Bankruptcy the Cure for Outstanding Student Loans?
Many Florida college students face the same problem long after graduation – student loans. When the bills begin to pile up, it can feel like you’re drowning in student loan debt. For many, the thought of filing bankruptcy to help alleviate the pressure of these debts seems like a good solution. But is it?
Filing for bankruptcy is already a tough task, but the process of ridding yourself of student loan debt when filing bankruptcy is an altogether separate challenge . This is why it’s always wise to seek guidance from a knowledgeable bankruptcy attorney before pursuing this remedy. Still, many believe this is the only answer to their problem – and sometimes they’re right.
Is discharging student loans even possible during bankruptcy?
Answering this question is sometimes the most difficult part of the process for people. It’s not impossible to discharge your student loan debt when filing bankruptcy, but that doesn’t mean it’s easy.
When you seek to discharge your student loan debt during bankruptcy, the entire filing process changes and more challenges are presented to you. This is where most people either give up or try to file on their own, which often results in a denial. Of all people who file for bankruptcy in the United States, only 0.1% of them try to discharge their student loans. Of this group, only 40% actually succeed. That means only 0.04% of people who seek to have their student loan debt discharged will receive a partial or full forgiveness.
The low success rate is mostly due to the legal requirements that often stand in the way. Currently in Florida, student loans cannot be discharged during bankruptcy except for under certain circumstances or “undue hardship.” This automatically disqualifies the majority of those looking to discharge their student loans – and it only gets more difficult for the remaining few.
What classifies as an “undue hardship” in Florida?
It’s difficult to say what is considered an “undue hardship” in a bankruptcy case that includes student loan debt. Congress has never given the term a real definition, leaving it up to the courts to decide at their own discretion. Many courts use a guide known as the Brunner Test to help examine each person’s financial situation and decide if their student loan debts should be forgiven.
Under the Brunner Test, the following must be proven by the person filing:
- “He or she cannot maintain, based on current income and expenses, a minimal standard of living for himself or herself and any dependents if forced to repay the loans.”
- “Additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans.”
- “He or she has made good faith efforts to repay the loans.”
If these requirements are met, the person is more likely to have their student loan debts either partially or fully forgiven.
How to file for bankruptcy and seek student loan forgiveness
If you have a high amount of student loan debt and don’t see any other solution in sight, and you’ve looked over the requirements for filing to have your student loan debts forgiven, setting up a consultation with an experienced bankruptcy attorney is a great first step.
At Kelley Kaplan & Eller, our team of highly qualified West Palm Beach bankruptcy attorneys can help guide you through the bankruptcy process and get you back on your feet financially. Contact us today for a consultation.
Resources:
abi.org/feed-item/the-brunner-test
papers.ssrn.com/sol3/papers.cfm?abstract_id=1894445
https://www.kelleylawoffice.com/how-filing-bankruptcy-in-florida-can-stop-wage-garnishment/
