For college graduates, their student loans will be their greatest burden. For many, they will get a job right out of college and begin the long, slow grind of paying them off. However, life doesn't always end up so simple. Sometimes you graduate and you don't find a great job right away. Sometimes you are forced to take a low paying job just to pay the bills, but when that student debt kicks in, it can leave you in dire straits. Many young people believe they have bankruptcy to fall back on, but not when it comes to student loans.
Unfortunately, most debtors will not be able to wipe out student loan debt with either Chapter 7 or Chapter 13 bankruptcy. However, there is one option. If student loans cause what is referred to as undue hardship, you may have options available to you.
In order for student loan debt to be discharged by bankruptcy, you need to demonstrate that in order for you to pay them, it would cause undue hardship. This involves the courts running a simple test known as the Brunner Test, though if you also have a low income or went to a for-profit trade school your chances will also be increased.
The Brunner Test involves three primary factors: Poverty, Persistence, and Good Faith. If you meet all three factors, your student loans can be discharged. So what do these three factors mean?
- Poverty - Based on your current income and expenses, you cannot pay your student loans and maintain a minimal standard of living.
- Persistence - Your current financial situation is going to continue for the entirety of the student loan repayment period.
- Good Faith - You have made a good faith effort in order to repay your student loans in the past.
If you check off all three of these factors, then you have a good case in court to discharge your student loans in bankruptcy. However, as with any bankruptcy filing, you will still need a talented attorney at your side to make sure you get the outcome that you want. If you are filing, especially with student loans, contact us today so Law Offices of James C. Shields can help get your life on track.