Many people in California struggling with debt are facing a heavy student loan burden on top of their credit card bills, medical debt and other large expenses. Student loan debt may feel like a trap with no escape, especially after bankruptcy reform provisions in the past decades made it almost impossible to eradicate student loan debt by filing for bankruptcy. While people may find relief from their credit card debt, car loans and other consumer debt, student loan bills stay on the record, aside from those who have been able to show “undue hardship” in repaying the loans.
Difficulties discharging student loan debt
In general, courts have interpreted the term “undue hardship” as requiring the borrower to show that it is essentially impossible for them to pay back their loans at all, such as a person who has become so disabled that they cannot work after their university degree was completed. Most people struggling with student loan debt are unable to meet this standard, prompting various calls for new reforms, especially as the national student loan debt has risen sharply in line with costlier tuition and fees. One piece of legislation introduced by several senators aims to create a new Chapter 10 provision in the Bankruptcy Act that would allow people to find relief from student loan bills.
Current options for bankruptcy filings
Currently, individuals struggling with insurmountable debt may opt for Chapter 7 or Chapter 13 bankruptcy protections. These types of filings, which vary based on required income levels and ability to repay, address a wide range of consumer and other personal debt.
Student loans are only one type of debt, and many people find it difficult to repay their student loans due to other overwhelming financial burdens. A bankruptcy attorney might provide guidance on whether a bankruptcy filing could help you find debt relief.