Young black college graduate with tuition debt, horizontalIt’s no secret that many people these days have student loans–financial aid they took on to pursue their collegiate and post-collegiate educations. Unfortunately, student loan interest rates can be much greater than that of mortgages or car loans. On top of that, the average price of today’s college education averages $32,405 for private colleges, $9,410 for state residents at public colleges, and $23,893 for out-of-state residents attending public universities. Even choosing the most affordable of the three categories, four years at an in-state public university, hits almost $40,000.

It’s no surprise, then, that so many Americans have overwhelming student loan debt. Recent reports indicate:

  • There’s $1.26 trillion in total U.S. student loan debt.
  • 43.3 million Americans have student loan debt.
  • The student loan delinquency rate is 11.6%.
  • The average monthly student loan payment (for borrowers aged 20 to 30 years) is $351.
  • The median monthly student loan payment (for borrowers aged 20 to 30 years) is $203.

You can be swimming in student loan debt taken on years–perhaps decades–ago, yet unable to make payments. What can you do?

Are you drowning in student loan debt? We can help.

Call us today.

Student Loan Debt

When it comes to debt and bankruptcy, there are generally two types of debt: dischargeable and nondischargeable. Dischargeable debt refers to debt which will usually be wiped out in chapter 7 bankruptcy; examples includes credit card debt and medical bills. Nondischargeable debt is not forgiven but required regular payments can be reduced and reorganized. Which do you think student loans are: dischargeable or nondischargeable?
If you said nondischargeable, then you’re right. Congress has labeled student loans as nondischargeable debts, meaning, in their eyes, they are too important to wipe out in bankruptcy. This realization can demotivate people with tens or hundreds of thousands of dollars of student loan debt who would actually benefit from bankruptcy.

Undue Hardship

There is a major exception when it comes to the nondischargeable nature of student  loans: the Brunner test. There is a major exemption in bankruptcy when it comes to education loans, and that is whether or not forcing an individual to maintain their loans would cause undue hardship. The problem, of course, is that “undue hardship” is not a hard-and-fast rule, but a subjective application on a case-by-case basis. There are, however, three main criteria courts expect a consumer to meet to pass the Brunner test:

  • Continuing to pay back these loans would cause the borrower to be unable to maintain a minimum standard of living.
  • The borrower’s financial situation is not likely to change or improve in the future.
  • The borrower must have made a good-faith, reasonable effort to pay back his or her loans.

If you’re overwhelmed by student loan debt, it’s important that you call an experienced Memphis bankruptcy lawyer. A bankruptcy lawyer will be able to help you understand your situation and file proceedings properly and with the greatest likelihood of success. Give us a call. My team of experienced Memphis bankruptcy lawyers and I are always here and ready to take your call. We’re here for you!