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An increasing number of people are having problems with handling their debt, with many having a large proportion of their obligations in the form of student loans. Should that be the case, a bankruptcy filing may not be a solution to getting rid of student loan debt. It does not make a difference whether a student is still in school, just graduated, or finished college some time ago.
Student Loans Are Extremely Hard To Get Discharged
According to latest changes in bankruptcy laws adopted by the government, there are extremely strict rules regarding discharge of government-backed or privately granted student loans. Most of these changes were put in place in 1998, when Title 11 was modified. According to these changes, most people would not be able to have their student loan debt removed. Another set of amendments, adopted in 2005, made it practically impossible to discharge student loans in bankruptcy.
An Opportunity Exists To Get Rid Of Student Debt Through Bankruptcy Filing
There is, however, a small window of opportunity to make this happen. It requires a declaration of a formal request to bankruptcy court providing proof of severe financial difficulty, arising beyond the control of an individual. In some rare cases such individuals are able to discharge some, or even all, of their student debt. To become eligible for student loan discharge an individual has to prove inability to sustain the lowest standard of living as per government regulations and submit a documented proof of incapacity to improve financial situation in the nearest future. Should the court decline such a request, your student loan debt would not be discharged. Your other debts, however, would be forgiven, easing up the possibilities for student loan repayment.
Bankruptcy Still May Be A Solution For Many
Chapter 13 enables individuals to re-classify their academic loans, giving them the opportunity to repay student debt sooner, as overall debt burden would be lowered through bankruptcy. Should your income be utilized for repayment of student debt by court order, no more than 10% of gross income may be suspended according to Title 11. While many may find it difficult to repay student loans, an attempt to discharge them in bankruptcy will most likely fail. Should you have a significant amount of other debts, a bankruptcy may be a feasible solution, since your overall debt level will be lowered significantly.
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