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Bankruptcy and students loans

Out of all of the people who have participated in higher education over recent years, a significant percentage has left their educational institution with large amounts of student loan debt. In an ironic turn of events, some who have pursued education to ensure a way to provide for themselves and their loved ones have been unable to do so because of the cost of their education.

When the time comes to begin making student loan payments, many students have found that they do not have the resources to pay for their loans and to cover their cost of living. The first thought in these types of situations might be to declare bankruptcy, but student loans are one of the few types of debt that are generally not removed by bankruptcy. There may, however, be exceptions.

Undue hardship

As a general rule, student loans are not impacted by a declaration of bankruptcy. Fortunately for some, there is an exception to this rule and it is known as undue hardship. Undue hardship simply means that you do not have the resources to pay for your loans and to maintain a minimal standard of living at the same time.

The Brunner Test

To determine whether or not an individual is qualified for undue hardship, the individual must pass a particular test known as the Brunner Test. The Brunner Test is composed of three criteria that a person must meet before they are considered to be under undue hardship. They are,

1) The debtor cannot maintain a minimum standard of living while also paying their loans in their current situation.

2) Their current economic situation is not likely to change in the foreseeable future.

3) The debtor has done their best to pay their loans up to this point.

If a court decides that you have been put under undue hardship, they will remove your loans and you will no longer be responsible for paying them. However, if you are able to qualify for undue hardship, you may want to seriously consider applying for bankruptcy.

Any of these decisions will have a serious impact on your future. For example, a declaration of any type of bankruptcy will stay on your credit history for ten years and may prevent you from doing many things down the road.

However, if you evaluate your situation and you determine that you may be under undue hardship or that bankruptcy may be beneficial, it is highly suggested that you obtain the services of a legal professional who specializes in these matters. They will be able to use their expertise to guide you through the often complicated legal process toward the best possible outcome.

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