Student debt and “undue hardship”

If you are buried deep in debt but your debt is mainly student debt you may want to reconsider bankruptcy since almost all student loans are non-dischargeable. The law is clear when it comes to student loan debt: Unless repayment causes the debtor undue hardship, courts won’t allow discharge of student debt. The above is applicable to Chapter 7 Bankruptcy and Chapter 13 Bankruptcy too. So in order to be able to get discharged from student debt you’ll need to meet the “undue hardship” requirement. This concept implies an excessive poorness caused by the debt that would affect the ability of the debtor of paying for basic needs. The main difficulty is to prove undue hardship.

A bit of history

Student Debt used to be more easily discharged in the past. However, due to abuse, Bankruptcy’s legal requirements were modified and now it is extremely difficult to get discharged. The abuse consisted on filing for bankruptcy immediately after finishing college, thus getting discharged of their student debt prior to joining the workforce. When this practice became common, lenders complained and got the administration to modify the rules that controlled bankruptcy.

Discharging Nowadays

Currently, the exception of hardship includes government loans and nonprofit organization loans. So it has become even more difficult to get student debt discharged. Besides, not only has the debt to disrupt the debtor ability to maintain an adequate minimal standard of living but the debtor must have tried by every possible way to repay the debt.

Co-signer Responsibility

Even if the debtor meets all this requirements, any co-signer who subscribed the loan with the debtor won’t be covered by the hardship exception and thus will be the sole responsible one for the debt repayment. This is one of the lender’s main securities and explains why most of the student loan lenders require a co-signer in order to grant a loan.

Final considerations

Filling for bankruptcy or not is a decision that has to be intensively meditated and must be substantiated in the need of a fresh new start when there is no other choice. If a bankruptcy won’t discharge your student debt, and if your student loans are the main constituent of your debt, then it makes no sense to suffer all the bad consequences associated with a bankruptcy without being able to enjoy the benefits.

However, if your income is too low, your debt won’t let you even breath and there is no other way of recovering from this situation, you may be able to convince a court that due to the excessive burden your debt has turned into, it should be discharged. That way, you’ll be able to get a fresh start and become debt free.