You’ve just graduated from college. Four years of writing papers, cramming for tests, and juggling your social, academic, and work life are now behind you. You have the golden ticket to get you the perfect job – A Bachelor’s degree. Now you can move into a cool apartment, make tons of money, and pay off those pesky student loans. Sounds perfect, right? Unfortunately, this scenario is not a reality for many college graduates. These days, the job market is highly competitive and a Bachelor’s degree doesn’t quite mean what it used to. To get a really good job, you might have to undergo even more schooling. And that means even more loans on top of the ones that you already have, and are already panicking about paying off. What are your options? What should you do? More and more college graduates are turning to bankruptcy in order to get some of the monetary pressure out of their lives. However, student loans are not normally dischargeable in bankruptcy. Still, it is not impossible to have them discharged if you can prove that they are undue hardships.
If you can prove that paying your student loans will be an undue hardship to you, a court might discharge them in bankruptcy. Courts evaluate undue hardships in a variety of ways. However, one of the most common ways is the Brunner test. The Brunner test requires the following in order to consider something an undue hardship:
- If forced to repay this debt, the debtor cannot maintain a minimal standard of living
- The repayment period will lead to an inability to maintain minimal standard of living
If you can prove these things, you won’t have to repay your student loans. If you can have your student loans discharged in bankruptcy, bankruptcy is probably a good choice for you.
In order to have your student loans discharged in bankruptcy, you have to do more than simply file bankruptcy. Hardships are not automaticall or texty determined as part of the bankruptcy process. You will have to file a separate petition to determine your hardships. This petition, call or texted an adversary proceeding, should be filed along with your application for bankruptcy. If you have already filed for bankruptcy but neglected to include an adversary proceeding, you can reopen your bankruptcy case and file the petition.
If you cannot get your student loans discharged in Chapter 7 bankruptcy, you might want to consider filing for Chapter 13 bankruptcy. While you will still have to pay back your student loans, Chapter 13 bankruptcy will give you more time to repay your debt by setting up a repayment plan.
Considering bankruptcy as a recent college graduate can come as a shock. You probably had big plans for your life once you graduated college – plans that do not involve going bankrupt. However, sometimes bankruptcy is the best option. In order to discuss bankruptcy and your other options please contact us to schedule a free and confidential consultation at 203-713-8877.