With student loan debt increasing throughout the U.S., many college graduates in Tennessee may be tempted to turn to bankruptcy. While students loans were dischargeable in bankruptcy prior to 1976, Congress has amended bankruptcy laws several times. Since 1998, public student loans have not been allowed to be discharged in bankruptcy absent a showing of undue hardship. In 2005, Congress made the same provisions with respect to private student loans.

In changing the bankruptcy laws, Congress did not define the term “undue hardship.” However, some federal courts have determined that a borrower must show that extenuating circumstances make it impossible to maintain a minimum standard of living. In addition, it should be clear that those circumstances will continue over the entire term of the loan. Furthermore, the borrower must have attempted to repay the loan in good faith. Courts may also consider the age, income and health of the borrower.

Even if a borrower can meet the criteria, experts recommend that bankruptcy be pursued only as a last resort. There may be faster and cheaper options for borrowers who are unable to make their student loan payments. Alternative actions include income-driven repayment plans and repaying high-interest credit card debt.

Borrowers who have exhausted all other available options and still wish to consider Chapter 7 to discharge their student loan debt could seek the assistance of an experienced bankruptcy attorney. By working with an attorney, the borrower may be able to achieve a fresh start while stopping wage garnishments and harassing collection calls.