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Bankruptcy And Student Loans: The Basics

According to some estimates, student loan debt in the U.S. now stands at $1.3 trillion - and growing. With such large amounts of crushing debt hanging over their heads, it is no wonder why many college students and recent graduates feel like they may never get ahead. However, for some, relief may be available through bankruptcy.

While it is true that student loan debt is typically not dischargeable during bankruptcy, that is not always the case. In fact, under certain circumstances, you may be able to eliminate all of your student loan debt by declaring bankruptcy, but only if you can prove that having to repay your debt would "impose an undue hardship" upon you and your dependents.

When determining whether an "undue hardship" exists, bankruptcy courts in Ohio will often employ the three-part Brunner analysis, which includes:

  • Based on your current income and expenses, you cannot maintain a minimal standard of living for yourself and your dependents if you are forced to repay your student loans
  • Additional circumstances exist indicating that this poor economic situation will likely continue for a significant portion of your student loan repayment period
  • You have made a good faith effort to repay your student loans

If you can prove that these three factors apply to your situation, you may be able to have you student loan debt eliminated through bankruptcy. However, even if your student loans are ultimately determined to be non-dischargeable, bankruptcy may still be able to help. In fact, you may be able to eliminate other debt - such as credit card and medical debt - which may free up money to pay off your student loans.

In any case, it is best to speak with an experienced bankruptcy attorney if you are dealing with insurmountable debt. A skilled lawyer can explain your legal options and help you navigate the often-confusing bankruptcy process.

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