Friday, December 9, 2016
Why Is Student Loan Debt So Hard To Get Rid Of In A Bankruptcy?
One of the most fasting growing debts held by most Americans is student loan debt. The amount of money owed for college courses has reached astronomical figures, and many recent graduates are not even employed in the field in which they sought a degree. There is also a large number of college graduates that don’t have a job at all, and so are unable to repay their student loans. The inability to repay student loans can be handled, for a while, because you can ask your lender to defer the payments or grant you an economic hardship forbearance. But sooner or later the government will come calling for its money, and you will have to find a way to come up with the funds to pay back your student loans.
With so many people turning to bankruptcy to find financial relief, you might be thinking that you can erase your student loan debt in this way as well. But, discharging a student loan debt in bankruptcy is harder than you might imagine. In most instances the debt is not discharged, and here is why:
• To seek a finding that you do not have to pay back your student loans, you have to file an adversary proceeding, which is like a case within your bankruptcy case. The matter will proceed to trial before the Judge, if you are not able to come to an agreement with the other side, and this requires you to give testimony and provide evidence showing your financial condition.
• Even though your financial condition is likely dire, given you have filed bankruptcy, it must be so dire that there is virtually zero chance you can ever pay back any part of your student loan in order for the Judge to find that the debt can be discharged.
• Your household’s entire financial condition will be analyzed during this process, so if your spouse has a healthy income, chances are you will not be able to prove that paying back even a portion of your student loan will result in a significant hardship on you or your dependents. This is the Court’s reasoning many times, because if you are married it is presumed your spouse is just as responsible for the well-being of your dependents as are you, and if their income is sufficient to provide basic necessities then you may not be able to meet the required legal standard of “undue hardship.”
If this sounds like a hard thing to prove, it is, but that does not mean it is impossible. It can take a lot to show that your financial condition will never improve, such that you will never be able to pay back your student loans, but there are cases where the evidence is in your favor. And if you are not able to discharge your student loans, you can at least breathe a little easier knowing your payments may be easier to make when other debts you have are discharged. That is the beauty of bankruptcy, it frees up money you were spending on some debts, so you can pay the debts that remain.
For more information about bankruptcy and student loans, call us today or reach us online at www.law-ri.com.