Report: Bankruptcy approval of relief from student loans on the rise
It is no surprise that people throughout the country are struggling to manage student loan debt. A recent piece by Forbes found that student loan debt reached the highest it has ever been in 2019. According to the article, an estimated 44.7 million borrowers collectively owe over $1.5 trillion in student loans. As a result, student loans are now the second leading form of debt in the country, second only to mortgages.
Part of the problem that has led to the surge in student loan debt is the fact that this form of debt is much more difficult to manage then mortgage loans and other forms of debt. Unlike these other forms of debt, it is generally much more difficult to get relief through bankruptcy for unmanageable student loans. Although still difficult, an article published in the American Bankruptcy Law Journal finds that those who attempt to file for bankruptcy relief and discharge student loan debt are successful half of the time.
That figure may seem high, and it comes with a word of caution. Those who do move forward with an attempt to discharge student loan debt have likely had their case reviewed by an attorney who specializes in bankruptcy law. Getting approval generally requires meeting the undue hardship requirement – which is not an easy feat. This standard involves an analysis of the applicant’s financial situation. The applicant must establish the repayment would make it impossible to meet the minimal standard of living for a signification portion of the repayment period and that the applicant has made a good faith effort to repay the loan.
Although this requirement is difficult, a recent investigative report from NPR finds at least some federal bankruptcy judges may have a more open mind. According to the report, a recent case out of New York involved the discharge of over $200,000 in student loans. Within the ruling, the judge stated she would not “participate in perpetuating [the] myth” that student loans are impossible to discharge.
Does this mean those who cannot repay their student loans should attempt to get the debt discharged through bankruptcy? Not in all cases. Again, there are requirements that must be met in order to qualify for relief. However, it is also important for those struggling with their payment obligations to know bankruptcy for their student loans is just one of many options. A legal professional experienced in this and other forms of debt relief can review your situation and discuss the benefits and risks of each, helping to better ensure you choose a path to financial freedom that best meets your needs.