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What happens to student loans in bankruptcy?

With student loan debt soaring to a record $1.6 trillion total, many Americans with college degrees are left with large debts that they struggle to pay back. When other financial troubles arrive, turning to bankruptcy may be the only option. Many people in this situation may wonder whether the burden of student loan debt could be lifted through a bankruptcy filing.

Recent laws have made it more difficult to discharge student loan debt.

Many people believe that discharging student loan debt in bankruptcy is impossible, and it is easy to see why this belief persists. Thanks to new laws over the past few decades, it is much more difficult for bankruptcy to offer you relief from these debts. That doesn’t mean that relief is impossible, however.

Despite the difficulties of discharging student loan debt, you may be able to achieve relief if your struggle passes the Brunner Test. This test requires you to illustrate that:

  • You have tried to pay back your student loan debt
  • You cannot achieve an acceptable standard of living while making the required payments
  • This struggle is likely to continue until the loan repaid

Because interpretation plays a part in whether the court considers your debt “an undue hardship,” it can be important to work with an experienced bankruptcy attorney when presenting your case.

What will happen if your debt is an undue hardship?

If your case succeeds, the court may grant you relief from student loan debt in several different ways. These include:

  • Discharging your student loan debt
  • Discharging part of your student loan debt
  • Changing the terms of your loan to relieve the hardship

While challenging, it is possible to achieve meaningful relief from the burden of student loan debt through the bankruptcy process.

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