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A difficult task: Proving undue hardship with student loan debt

Of all the bills that Americans have to pay, student loans are atop the list for many people. Unfortunately, someone struggling with finances in Washington, D.C., or elsewhere across the country will find that it is nearly impossible to get rid of student loan debt, even after filing for bankruptcy.

According to the Consumer Financial Protection Bureau, more than one in four of the 41 million of Americans who have student loan debt are either in default or have fallen behind on making payments. On average, these people owe about $30,000 on government-backed loans. Instead of allowing people to discharge these debts like they could other items, such as credit card debts, the government is hoping that repayment plans will work. Currently, more than 5,000 people every day are getting signed up for a repayment plan through student loan servicers. Unfortunately, repayment plans simply are not feasible for many people.

In early October of this year, the Department of Education suggested making a certain type of privatized student loan debt dischargeable in bankruptcy. However, the current administration states that doing so would affect the solvency of its student loan program. Therefore, only in cases in which the debt places an undue hardship on the borrower can the debt be discharged.  In most cases, that means the debtor must demonstrate some type of long-term issues, such as a disability, that prevents him or her from making payments. Judges have little leeway to take into account other factors, such as unemployment.

According to Forbes magazine, the bankruptcy code should be amended to help people who are struggling with student loan debt. Anyone who is considering filing for bankruptcy should consult with an attorney.

Source: Forbes, “Why Student Loans Are So Difficult to Discharge in Bankruptcy,” Stephen Dash, Oct. 25, 2015

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