Lefkovitz & Lefkovitz
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Student loan debt discharged in bankruptcy case

Many people in Tennessee and across the country struggle with massive amounts of student loan debt. Historically, there have long been serious difficulties in discharging this debt in bankruptcy, even as the process can work effectively to handle other forms of unrepayable debt. One recent case of a law graduate, however, may indicate changing perspectives on how student loan debt can be assessed during bankruptcy proceedings.

To successfully discharge student loan debt during bankruptcy, courts apply a far harsher standard than they do to those who are seeking to escape from a mountain of credit card bills. The Brunner test aims to consider whether the person with debt can maintain some minimal standard of living if they continue to repay the loans, whether substantial hardship can be expected to continue for some time and whether the debtor had attempted to pay back the loans. Typically, people have faced extreme difficulty showing prolonged hardship. Many can only secure a discharge only after suffering a disability that has rendered them unable to secure an income.

However, in the New York case, a law school graduate was allowed to discharge $220,000 in student loan debt. He makes around $38,000 each year and faces a loss each month of over $1,500. The bankruptcy judge in his case stated that she refused to apply what she called a "quasi-standard of mythic proportions" that has led people to believe that it is impossible to address student loan debt through bankruptcy proceedings.

Someone dealing with student loan debt may consider to face substantial difficulties in seeking relief under bankruptcy protection. However, it can provide an important mechanism to seek debt relief overall. A bankruptcy attorney may provide guidance and representation throughout the process of pursuing a new financial future.

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