The amount of student loan debt has gone up astronomically in recent years. As students graduate and cannot find the jobs they were promised, or are not being offered salaries that would support paying off their student loans, they can end up in a very difficult situation. In some cases, students can actually owe more in interest each month than they are able to pay off.
While it has long been the case that student loan debt cannot be discharged in bankruptcy, there are a few notable exceptions. Today we will discuss the undue hardship exception. Keep reading to learn more about it and then reach out to The Law Offices of Paul Y. Lee at 951-755-1000 to talk to a California bankruptcy attorney.
The Specifics of Undue Hardship
When a person files for bankruptcy, undue hardship is an option to claim that can discharge student loan debt. Known as also the Brunner Tests, the undue hardship test involves the court looking at the whole picture and determining why the borrower is not able to pay their loan. Though every case may be a little different, the court ill generally evaluate these three factors:
- Can you afford to pay your basic living expenses while also paying back student loans?
- Are your current financial issues permanent or temporary?
- Have you attempting to pay the loan?
If the court decides that your financial issues are the result of your own bad decision then they will not sign off on your undue hardship claim.
Filing for an Undue Hardship
To file for your own undue hardship, the first step is to file for either Chapter 7 or Chapter 13 bankruptcy. You must then file an adversary proceeding, which is a process in which you claim that paying your loans would create an undue hardship. You can expect that your loan servicers will dispute this claim, which will impact whether your dispute is accepted or not.
Bankruptcy Can Help Even if Your Student Loan Debt is Not Forgiven
While the ideal would be to have your student loan debt forgiven, this is not the only option can that can have a large impact on your financial situation. If you are unable to afford your loan payments now due to credit card debt, car payments, or a large mortgage, then reducing or eliminating these debts via bankruptcy could be the answer to finally afford your student loan payments.
It is Worth Your Time to Find Out What Your Options Are
If you are struggling under student loans or other debt, do not assume that you are out of options. The truth is that there may be choices you have not thought of. At The Law Offices of Paul Y. Lee we work with clients in all sorts of financial situations and we find the solutions they need. Contact us now at 951-755-1000 for a free bankruptcy consultation.
