Lefkovitz & Lefkovitz
Nashville Office 615-686-2279 Cookeville Office 931-400-2218
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Student loans often aren't discharged in bankruptcy

Americans owe a total of $1.59 trillion in student loan debt. However, many Tennessee residents and others who carry student loan balances won't be able to discharge them in bankruptcy. For some, it is because they don't qualify to file for Chapter 7 bankruptcy. Chapter 7 bankruptcy allows debtors to liquidate assets and use the money raised to pay creditors. To qualify for a liquidation bankruptcy, an individual will need to pass a means test.

Of course, this is the just the first step for those looking to discharge student loan debt. After qualifying for Chapter 7 protection, it is then necessary to show that an individual has made a good faith effort to repay a student loan debt. Individuals must also prove that making payments will constitute a hardship that will last for most or all of the loan repayment period.

Generally speaking, courts have wide leeway to interpret these rules when determining if a debt can be discharged. Therefore, isn't uncommon for judges to rule in favor of student loan companies. Instead of filing for bankruptcy, student loan debtors are encouraged to work with their lenders to defer payments or apply for an income-based repayment plan. This may allow borrowers to better manage their debts until they are in a better position to pay them off.

By filing for Chapter 7 bankruptcy, a debtor may put an end to creditor phone calls and letters. It may also put a temporary end to creditor lawsuits or other collection activities. Even if a student loan or other debt isn't discharged, filing for bankruptcy may give a person time to negotiate a new payment plan or raise money to pay off a given balance. An attorney may offer assistance to those interested in filing for bankruptcy.

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