Claiming Bankruptcy WILL NOT HELP YOU.
This is part three of what will be at least a three part series explaining the truth about student loans as they pertain to credit and some of the myths and outright lies that people are putting out on the Internet, particularly on YouTube, regarding student loans.
This episode will explain bankruptcy as a tool for discharging student loan debt. Part 1 was how student loans affect your credit score including how to help it and how they can potentially hurt it. And Part 2 which I released last week is generally about discharge cancellation and forgiveness of student loan debt.
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The Cold Hard Truth
I know there’s all kinds of people out there trying to tell you that bankruptcy
will discharge your student loan debt. They’re not lying but guys here’s the cold hard facts; student loans are difficult to discharge in bankruptcy. It’s not impossible, but it is hard to do. You and your attorney are going to have to show that the payment of the debt will impose an undue hardship on you and your dependents. Different courts throughout the United States are going to use different tests to evaluate whether you as a borrower are going to have an undue hardship.
The most common test is the Bruner test which requires your showing the court that you will not be able to maintain a minimal standard of living if you’re forced to repay your student loan debts. Of course that’s based on your current income expenses at that time. In addition to that you’ve also got a be able to prove that some set of circumstances exist that connect keep you in that financial state for a significant portion of the repayment for the loans. And finally you have to have made good faith efforts to repay the loans up to that point.
If you can successfully prove these three things your student loan might be completely canceled. And of course filing for bankruptcy also automatically protects you from collection actions on all the rest of your debts as well.
