Student Loan Debt and Bankruptcy

According to a recent Bloomberg Business article, total student loan debts balances now have topped $1.2 trillion. The average federal student debt is $29,000. As a result, there are eight million borrowers who now are in default on all types of student loans. Student loan debt has reached epic proportions and has surpassed credit card debt as the largest type of debt for Americans today.

Current Prohibitions Against Discharging Student Loans in Bankruptcy

As it stands today, it is extraordinarily difficult to discharge student loan debts in bankruptcy. Protection of government-backed student loans from bankruptcy has been in place since 1978; Congress added protection for private student loans to the federal bankruptcy code in 2005. As a result, although consumers are typically able to discharge other debts in bankruptcy proceedings, including medical bills and credit card debt, they cannot get out from under the burden of student loan debt, which is often a proverbial mortgage-sized albatross around their necks.

Bankruptcy Discharge for Student Loans Not Impossible

In the rarest of circumstances, you may be able to discharge student loan debt in bankruptcy proceedings. In order to do so, you must prove that continuing to hold you responsible for repaying your student loan debt would be an undue hardship on you. To that end, a bankruptcy court typically requires you to prove the following three elements:

●If you continue to pay the loan, you would be unable to sustain a minimum standard of living.

●Your financial situation is not likely to change in the future.

●You have made a good-faith effort to repay your student loans.

The reality is that most borrowers do not even attempt to include student loan debt in their bankruptcy proceedings because they believe that doing so will be futile. While this is the case for many consumers, there are situations in which you may be able to convince the bankruptcy court that you meet the undue hardship requirements as outlined above. In these cases, you may be able to discharge some or all of your student loan debt.

Filing an Adversary Proceeding

In order to ask the bankruptcy court to discharge your student loans, you will have to file what is called an adversary proceeding within your bankruptcy case. This is essentially a lawsuit within the bankruptcy case. While it is possible to file an adversary proceeding on your own, it is a complex procedure. Plus, given the difficulty of discharging student loan debt, it is essential that you consult with a Colorado bankruptcy attorney who has experience handling these kinds of issues within a bankruptcy proceeding.

Call Your Colorado Bankruptcy Lawyer Today

At Summit Legal Consultants, we know federal and state bankruptcy laws and how to best present your case before the U.S. Bankruptcy Court. If you are in a situation where you owe student loans or any other type of debt burden that is making your life financially impossible, you need the expertise of Loveland bankruptcy attorneys who have the skills and knowledge to achieve your goals. Call us at 1-970-776-9504 or email us at [email protected] to get started today.