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Can you discharge student loan debt through personal bankruptcy?

The student loan debt crisis has hit many in Tennessee hard. Student loan payments have risen to such degrees that people are being forced to make uncomfortable decisions, such as having to decide which bills to pay each month and which to put off. Sometimes even taking care of the necessities such as putting food on the table, paying rent or a mortgage, or paying for electricity or water become difficult if not impossible. When this happens, people may want to consider filing for personal bankruptcy.

Some may have heard that student loan debt is not dischargeable through personal bankruptcy. However, that is not entirely true, although it is very difficult. If a person qualifies for Chapter 7 bankruptcy, the court will use what is called the "Brunner Test" to determine if a debtor's student loans should be discharged. Under this test, the debtor must be able to show that they would be unable to keep up a basic standard of living if they were forced to pay back their student loans. The debtor also must show that such hardships would last for the entire repayment period and that their financial situation will likely not change during that period. Finally, the debtor must show that they have made a reasonable attempt to pay back their student loans.

These can be difficult standards to meet, and sometimes a person's income disqualifies them from filing for Chapter 7 altogether because it is too high. If so, a debtor can file for Chapter 13 bankruptcy. However, they may still be eligible for some student debt relief. In a Chapter 13 bankruptcy the debtor will arrange a court-approved plan for paying back their debts over three to five years. Thus, they may be able to alter the terms of their repayment of their student loans in a way that is more manageable than what was available under the original repayment plan.

Even if neither of these options are feasible, filing for personal bankruptcy can discharge other types of debts, leaving a person with more income to funnel towards student loans. In the end, though, it is up to debtors to determine how best to tackle their unmanageable debt. This post does not provide legal advice and cannot promise a specific result in any person's case. Therefore, those who need more information on this topic can consult with an attorney so that they can make informed decisions moving forward.

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-624-4002
Toll Free: 800-257-7594
Fax: 423-624-0509
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