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The Law Offices of Dax J. Miller

student loan bankruptcy

Discharging Student Loans in Bankruptcy May Get Easier

Discharging student loans in bankruptcy may get easier.

Student Loans Causing Undue Hardship

Currently, discharging student loans in bankruptcy requires you prove that they create an undue hardship.  Bankruptcy Courts struggled with how to define “undue hardship.”  You basically have to show that you cannot maintain a basic standard of living while paying the student loans and that this difficulty would last throughout a large chunk of your repayment period.

Undue Hardship Almost Impossible to Prove

That level of hardship has been virtually impossible to prove in Bankruptcy Courts.  The result is that many people who successfully filed a bankruptcy are still stuck with a debt that they have little or no ability to repay.  That then impacts the rest of the economy in that those people cannot buy cars, houses, or make other purchases that drive our economy as a whole.

Overwhelming Student Loan Debt

Student debt in the United States amounts to over $1.5 trillion.  That amount of debt is second only to mortgage debt in this country.  The Brookings Institute estimates that nearly 40 percent of all student loan borrowers will default on their loans by 2023.  This could spell catastrophe for not just those borrowers, but the economy as a whole.

Hope on the Horizon

The Department of Education indicated interest in broadening the definition of “undue hardship.”  An expansion of this definition would allow more student loan debt to get discharged through bankruptcy.  However, this is not simply a “get-out-of-jail-free-card.”  There are still very strict guidelines to be followed.  Notably, even a significant uptick in discharged student loan debt would pale in comparison to the total amount of student loan debt in the U.S. ($1.5 trillion).  The impact on the individual would be huge.  The impact on the student loan system as a whole would be small.

Discharging Student Loans in Bankruptcy

If you’re having trouble with student loans, you need to seek help as soon as possible.  When in default, student loans can garnish your paycheck and even seize your tax refunds.  Even current bankruptcy laws still permit you to get your student loans back under control.  Contact The Law Offices of Dax J. Miller, LLC today to learn how we may help you with your student loan debt.