Student loan debt and bankruptcy

There is no question that for many individuals, filing for bankruptcy is the best course of action they can take. Though the process may be stressful, for most, being able to discharge the debt that is undoubtedly dragging them down, makes it well worth it. While most types of debt are dischargeable, there are some that debtors remain responsible for. For example, taxes and back child support must be paid. This is generally the case where student loan debt is concerned as well. There are some exceptions however.

Generally, to rid oneself of student loan debt there must be a showing of circumstances that constitute "undue hardship" when it comes to playing one's loans. An example of a situation where this might be granted is when someone is disabled. When it is discharged, it is accomplished through an additional proceeding referred to as the "adversary proceeding." While this is usually difficult to do, the lack of success could in part be due to the expense associated with the process along with the belief that it is impossible.

More recently however, some borrowers have better success with the discharging school loan debt. One man succeeded when it was shown his wages were garnished by the student lenders to the point where he could not support his family. In other situations, two women who never made payments or sought assistance via repayment plans based on their incomes, saw their student loan debt discharged. Because of their small incomes, the discharges were granted.

Even in situations where it is not possible to discharge student loan debt, bankruptcy might still be a good option. Because the process is often complicated, working with a bankruptcy lawyer is the best place to start.

Source: Reuters, "Bankrupt? How to get student loan debt erased," Liz Weston, March 4, 2014

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