O'Brien Law Firm, LLC - Bankruptcy

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How student loans might be discharged in bankruptcy

In most circumstances, it is not possible to discharge student loans through bankruptcy. However, some Mississippi debtors may be able to discharge them if a few factors are in place. These rules apply to both private and federal loans.

The borrower must be able to demonstrate that repaying the loans will lead to “undue hardship”. What constitutes undue hardship has never been defined by Congress, but nearly all federal circuit courts use a standard called the Brunner test. The Brunner test requires that there be extenuating circumstances and that extreme hardship will result from paying back the loan that will not allow the person to keep up a minimum living standard. It also requires that the circumstances are unlikely to change for the term of the loan and that the person has made an effort to repay the loan. This does not necessarily mean the person has already made one or more payments. It can mean that the person has attempted to set up a payment plan or taken other steps. The 8th Circuit uses a similar standard while the 1st Circuit does not have a set standard.

There are alternatives to trying to discharge these loans in bankruptcy. A person might be eligible for income-driven replacement. Paying off other debt or getting a loan with a lower interest rate could also help.

A person who is struggling to pay student loans or other obligations might want to talk to an attorney about the types of debt relief that might be available. If the debtor’s income is below a certain level, Chapter 7 bankruptcy might be a possibility. Getting rid of credit card debt could allow the person to pay off student loans or other debts that cannot be discharged, such as child support.