Smith Ortiz P.C. Articles Student Loans and Bankruptcy

Student Loans and Bankruptcy

By Smith Ortiz, P.C.  Jul. 8, 2013 10:19a

Student loan debt is not generally dischargeable by filing a personal bankruptcy petition. The only way a student loan debt can be addressed through bankruptcy is to prove to the court that it would create an undue hardship to pay it off. Generally, it involves the student loan debtor initiating a separate lawsuit to be filed within the bankruptcy case to prove the hardship. Courts vary in the procedure connected with this but most use what has come to be called the "Brunner standard." This standard, which the courts will apply very stringently, is composed of three factors. First, you must show that if you were to repay your student loan debt, you would be unable to then maintain a minimal standard of living for yourself and your family. Second, you must show that your current financial condition is likely to continue for some time. Third, you must show that you made a good-faith effort to repay the loans prior to your bankruptcy petition.

Because most courts are reluctant to discharge a student loan debt and because the procedure to obtain such a discharge requires an additional legal procedure which the student loan borrower must pay for, most student loans remain outside of bankruptcy protection. Recently, however, a 33 year-old man won a partial student loan discharge after a 10-year legal battle. The man had borrowed $85,000 to finance his undergraduate and law school education after which he failed to pass the bar three times. He took a job elsewhere, married, and had a child. The 9th U.S. Circuit Court of Appeals reinstated the partial discharge after the bankruptcy court had declared it non-dischargeable.

Bankruptcy Attorney in Chicago, Illinois

As you can see by the above story, when it comes to student loans bankruptcy cases can be very complicated. Most bankruptcy cases involve the discharge of unsecured debts such as credit card accounts, medical bills, dental bills, payday loans, and other personal loan scenarios. For those with student loans, discharging overwhelming debt in other areas may make it easier to repay a student loan.

Every bankruptcy case is unique and every debtor has his or her own personal goals and objectives. The process, however, requires proper and thorough paperwork and an adherence to the rules and regulations set up by the federal and state government. To ensure that your case is handled efficiently and per the law, you should seek the services of a qualified bankruptcy attorney. Smith Ortiz, P.C. has more than 26 years of experience in this field. That kind of extensive experience speaks volumes for the level of client service and legal ability you will find at this firm. Contact their offices to schedule a free consultation to get started with your personal bankruptcy or other debt relief alternative today.

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