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How filing for bankruptcy affects student loan debt

Many people in New Jersey and throughout the United States are affected by student loan debt. In fact, Forbes reported that as of 2017, over $1.3 trillion of debt was held by 44 million borrowers in the country.

Many borrowers manage to make minimum payments. However, what if a person has other debts and is contemplating bankruptcy? How would the student loan debt be affected by this?

Likelihood of student loan debt being completely discharged

It is not impossible for student loans to be discharged after a person has filed for bankruptcy. It is extremely difficult to do so, but there is a slim chance.

It is difficult because the person filing for bankruptcy needs to pass a Brunner test to get student loans discharged. This test consists of several components the filer needs to pass.

Components of the Brunner test

First, the person will need to show that making minimal payments would create an undue hardship. Next, the test considers whether a person will be facing a hardship throughout a significant portion of the repayment period. Finally, the person will need to show that he or she made a legitimate effort to pay off any student loans in the past.

It can be difficult to meet all three criteria because they are all highly subjective. A person may assume he or she qualifies, but a judge may see otherwise.

Most likely scenario

Chances are likely that people will not be able to completely discharge this debt through bankruptcy. However, it is possible for people to receive a reprieve period where they do not have to worry about paying off that debt for a specific length of time.

Despite the fact that it is hard to discharge student loans through bankruptcy, it can still be a path worth pursuing for someone who cannot repay all debts. A bankruptcy law attorney can help those seeking debt relief.

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At the law offices of William H. Oliver, Jr. & Associates in Toms River and Lakewood, New Jersey, we represent clients in Toms River, Neptune, Trenton, Middletown, Red Bank, Wall, Lakewood, Lakehurst, Manchester, Asbury Park, Old Bridge, Jamesburg, Barnegat, Forked River, Manahawkin, Ocean Township, Brick, Manasquan, Howell, Freehold, Hazlet, Bradley Beach, Brown Mills, Long Branch, Keansburg, Marlboro, Bayville, Beachwood, Whiting, Sayreville, South River, East Brunswick, Monmouth County, Ocean County, Middlesex County, Burlington County and Mercer County.