Lefkovitz & Lefkovitz
Nashville Office 615-686-2279 Cookeville Office 931-400-2218
Serving all of Middle Tennessee's Bankruptcy Needs

Student loan debt and bankruptcy: What is "undue hardship"?

If you're struggling to make your student loan payments, you have something in common with millions of other Americans. Even if you have a decent job, your student loans may be getting in the way of your ability to pay for necessities like housing, transportation and food.

According to the Brookings Institution, borrowers in the U.S. owe a total of about $1.5 trillion, according to a story from CNBC. And in the opinion of the Federal Reserve's new chief, Jerome Powell, the student loan crisis has potentially big economic implications for the country. Yet the federal bankruptcy code still makes it very difficult to discharge student loan debt in bankruptcy, partly because of murky language about "undue hardship." What does that phrase mean?

Why is student loan debt so tough to get rid of?

Bankruptcy law allows debtors to get relief from many kinds of problematic debt -- medical bills, lines of credit, personal loans, credit cards and even certain kinds of mortgages -- and even the IRS is willing to offer compromises on some federal tax debt. Yet troubled borrowers often feel like they can't get anywhere with their student loans.

In a consumer bankruptcy case, it's tough for debtors to prove in court that they can't service their student loans due to "undue hardship," which seems to be loosely defined as a very prolonged inability to make loan payments over the repayment period while also paying for basic needs ... while also having tried to pay. Many have complained that this unclear definition has made it hard -- and unfair -- for borrowers to get any meaningful help with student loans while virtually every other form of debt can be addressed in bankruptcy.

Your situation is unique -- really

If you're considering bankruptcy, get legal advice about your options for dealing with student loans and other difficult debts. Your situation may resemble that of other people struggling with student loans, but it is critical to have a professional (not just a friend or family member) evaluate your entire picture if you want the best possible outcome.

Your student loans may be easier to conquer than you think. Bankruptcy may or may not be needed to get you to a happier financial place.

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