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Discharge Student Loans?

Discharge Student Loans?

Can you discharge student loans in bankruptcy? Maybe soon you can. Eliminating student loans though bankruptcy is not normally allowed under the current bankruptcy code. Though student loan debt is unsecured, like credit card debt and medical bills, it is not treated the same. But times may be changing.

As this editorial piece for the Los Angeles Times reflects, perhaps now is the time to reevaluate whether you can discharge student loans. Student loan debt has skyrocketed over the last decade. So have college costs. Given the tuition increases over the same span it should not be a surprise for the spike in student loan debt.

student debt 1College costs have exploded and, along with it, debt. College degrees, once considered financial bedrock, have not held their value compared to their costs. If your graduate from college you should earn more. Right? Often this is not so. At least when it comes to the inflated costs to get the degree. Earning $1,000 more per month does little good if that comes with a lifetime debt of $1,200 per month. The math doesn’t make sense. Perhaps, then, now is the time to evaluate whether you should be able to discharge student loans.

Student loan can be eliminated through a separate bankruptcy proceeding. It is a costly procedure. And it takes an extreme showing of hardship to rid yourself of the student loan debt. As I have often commented to clients, you would not want to be able to discharge student loan debt. To discharge student loan debt would not be worth the hardship it would require. Showing an inability to afford the debt is not enough.

Most debt that is discharged in bankruptcy requires, primarily, a showing of inability to afford the debt. Perhaps it is time now to apply this same standard to student loans.

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