Recently, the student loan crisis has made its way to the front and center of the media. Currently, the student loan debt in the United States has surpassed an incredible $1 trillion and with no end in sight, many experts are predicting that this could be the next bubble to burst. Young adults are selling their souls for what they think is a good education. All they are ending up with is no job and a lot of debt. The average college student in America is graduating with $27,000 in debt. There are many kids leaving Ivy League schools with a staggering $200,000 in debt. If the individual was going to receive that job that was commensurate with the amount of money they spent on school, this doesn't sound crazy. The problem is, there are no jobs available for people with experience, let alone new graduates. All that is available to these young college graduates is entry level positions that don't pay enough to live and pay the interest on their student loans.
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Much attention has been drawn towards this crisis and with no way out of these loans many people are starting to freak out. In the past, a person was allowed to include student loan debt when filing bankruptcy. After the changes to the bankruptcy code in 2005 all bets are off. When the bankruptcy code was amended in 1978 student loans could be included and discharged in a bankruptcy filing. With the exclusion of guaranteed student loans which would have to be repaid unless the person suffered an undue hardship. Later on, the bankruptcy law was changed to require the individual to make payments on the debt for at least seven years before they could include it in their bankruptcy. In 1998, the seven year payment option was removed, leaving only undue hardship for a reason to include student loans in a bankruptcy discharge. Prior to 2005, the list only included government guaranteed student loans and after the changes to the code, private student loans were added to the list.
The argument began of what defines an undue hardship and many bankruptcy courts began to use the Brunner test. This test was based on the Brunner case which defined undue hardship. The results of that case were that not only did the bankruptcy court require the debtor to prove they were unable to pay the loans and maintain a minimum standard of living, it also required to show that the debtor was making an effort to continue paying on the student loans. Furthermore, they also required the individual to prove that their situation would not allow them to pay this debt in the future either.
The bottom line is, it is not impossible to include student loans while filing bankruptcy but it's highly unlikely that they will be included in the bankruptcy. Everyone's situation is different and because of this it's important to get a consultation from a bankruptcy attorney regarding the matter. The bankruptcy attorney will be familiar with the judge and the requirements for that court district. Sometimes filing bankruptcy and eliminating all other debts frees up enough money to afford these payments. It's important for the youth of today to consider their financial choices because they could follow them the rest of their lives.
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