Getting higher education is a privilege that is supposed to bring financial stability and even prosperity. Unfortunately, while this is a goal for most college and graduate students, that is not always the outcome. Students all over the country are having trouble bearing the weight of their student loans. California is amongst the top states for high student loan debt problems.
The Shocking Student Loan Statistics
It was major news when outstanding student loan debt surpassed credit card debt. It was even more shocking when the debt exceeded $1 trillion for the first time in history. These numbers only continue to rise. According to the Federal Reserve, Americans now have more than $1.4 trillion in unpaid student loan debt.
Student loan debt is now the second highest consumer debt category, only behind mortgage debt. It is even higher than both credit card and auto loan debts. The average student in the Class of 2016 has $37,172 in student loan debt.
With so much student loan debt, the question becomes if anything can be done about this. Bankruptcy may be an option depending on the debtor’s specific situation.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a legal process that allows individuals to reduce or altogether eliminate their debts. The success of eliminating debt after filing a Chapter 7 depends on the debtor’s financial ability to pay back the debt.
When you file Chapter 7 bankruptcy, commonly referred to as “straight” or “ordinary” bankruptcy, you are basically able to wipe away a number of debts. These debts that can be erased are referred to as “dischargeable debts.” Common examples of dischargeable debt include credit card debt and outstanding medical bill debt. In most cases, student loans are not considered dischargeable debt. However, certain exceptions may apply.
When Can I Discharge Student Loans In a Bankruptcy Filing?
If you or your Stockton Chapter 7 bankruptcy attorney is able to prove that your student loans are causing excessive financial hardship, then the court may agree to discharge the debt. In order to prove this, you must meet the standards set out in the “Brunner Test.” Your attorney must prove all of the following requirements:
Your student loan repayment is preventing you from a minimum standard of living for you and your dependents (if you have any)
You have made a good faith effort to pay back your student loans
It is unlikely that your current economic situation is going to significantly change
Call an Experienced Central Valley Bankruptcy Attorney
If you have already filed for bankruptcy or are planning to file for bankruptcy, it is important to immediately seek legal help. It may be in your best interest to consult with an experienced bankruptcy attorney to help you determine what the plan that best suits your specific needs.