Many people think that you can't get student loan debt discharged in bankruptcy, but this isn't always the case. The truth here is that it is difficult to get them discharged, but it isn't impossible. A recent case involving a Chapter 7 bankruptcy ruling shows that it is possible.
A United States Navy Veteran opted to use student loans to fund his law school education from 1993 and 2004. He amassed $116,500 in student loans. Thanks to interest, those have ballooned to $221,400. Recently, a bankruptcy court judge ruled that the full balance of the loans could be discharged as part of his case.
The man had an annual salary of $37,600, but after he paid his monthly living expenses and the ones related to his debts, his net loss was $1,500 per month. The judge applied the Brunner Test to determine whether he was facing a financial hardship.
The Brunner Test includes three points, all of which must be met. First, the person must have an extenuating circumstance that's caused a financial hardship. Second, that hardship must be expected to last the life of the loan. Third, the person must have made an effort in good faith to repay the student loan.
When it comes to the effort that must be made, this doesn't mean that the person has to pay on the loan. Instead, they should have tried to find ways to pay it, such as attempting to find a mutually agreeable repayment plan.
For a person with student loans, their entire financial situation will likely determine whether they can pay those or not. A person with a higher income and no other debts might be more able to pay off student loans than a person who has that same income with a high debt load.
If you just can't get ahead on your finances because of your debts, you might need to consider bankruptcy. This can help you to address the hardships you're facing, so you can benefit from a fresh financial start.