People in Mississippi often struggle with significant debt, often including student loans. Student loan debt has even become a major issue for many people, especially when their income makes it difficult to impossible to pay them back. The burden of student loans may be particularly overwhelming when combined with other types of financial obligations, such as medical bills, credit card debt or personal loans. However, it can often be more difficult to discharge student loan debt in bankruptcy than other types of debt, leading many people to worry that they have little opportunity for financial relief.
Challenges of discharging student loan debt
While discharging student loans in bankruptcy is very difficult, due to changes adopted to bankruptcy laws that treat student loans differently than other types of debt, that does not mean it is impossible. In general, people who want to discharge their student loans need to meet a legal standard known as the “Brunner test”: that is, that they will suffer “undue hardship” if the debt remains in place. This is a more difficult test than that used to eliminate or restructure other consumer debt under Chapter 7 or Chapter 13 bankruptcy.
What is “undue hardship”?
Under the “undue hardship” guidelines, borrowers must show that they cannot meet a minimal standard of living if they must repay their student loans and that this situation is expected to continue over the length of their repayment period. People must also show that they made good-faith efforts to discharge their student loans. This argument is most successful for people who have suffered some kind of significant change in circumstances after their loans had already accrued.
However, people who do not meet this definition may still find some options to address student loan debt in bankruptcy. By discharging or restructuring other types of personal debt and negotiating an income-based repayment plan with their lender, borrowers may emerge with substantial debt relief.