Tens of thousands of people each year file for bankruptcy in order to escape their dire financial situation and start anew. In many cases credit card debt, car loans, unsecured debt, and even student loans can pile up, making an individual’s situation impossible to sustain.
When someone’s financial situation gets to this point, bankruptcy may become a viable option. However, it becomes very important to understand what exactly filing for bankruptcy can do to help your future, and what is beyond the scope of filing for bankruptcy.
In a recent case, Nielsen v. ACS, Inc., an Eighth Circuit bankruptcy court panel decided a case about when a debtor’s student loan debt can be discharged as a part of the bankruptcy.
The court started off by explaining that the general rule is that bankruptcy will not discharge a student’s debt “unless excepting such debt from discharge . . . would impose an undue hardship on the debtor or the debtor’s dependents.” It is the debtor’s responsibility to prove by a preponderance of the evidence that the student loan would impose a hardship.
In determining whether there is an undue hardship, the court considered the test used in that jurisdiction, which is the “totality of the circumstances” test. Under the court’s test, the following were considered:
- The debtor’s past, present, and future financial resources;
- The debtor’s reasonable living expenses; and
- Any other facts or circumstances relevant to the bankruptcy case.
The Court’s Decision
When the court looked at the case in front of it, it declined to discharge the student’s debt as a part of the bankruptcy. The court looked to the student’s financial situation, her lack of diligence when looking for employment, and the ability she had to continue to pay her bills even with the student debt. The court specifically noted the availability of income-contingent payment plans that would allow her to pay less per month over a longer period of time.
While the court was concerned about the financial well-being of the woman and her family, the concern was tempered by the duty of personal responsibility. In the end, the court held that the woman could not meet the “undue hardship” test, and her student loans were not to be discharged.
While this case took place in the Eighth Circuit, however, the factors that the court applied are also considered here in Kentucky and Indiana bankruptcy cases.
Are You Considering Filing For Bankruptcy?
If you have crippling student debt and are having a hard time servicing that debt, along with all the other debt in your life, it may be time to consider filing for bankruptcy. Before you file, however, take the time to consult with a dedicated Kentucky bankruptcy law attorney to discuss your financial situation in depth. Depending on your situation, bankruptcy may be a viable option, and it may even result in the discharge of your student loan debt. To learn more, contact one of the dedicated bankruptcy law attorneys at the Schwartz Bankruptcy Law Center at 866-366-3328 to set up a free initial consultation today.
More Blog Posts:
Bankruptcy Judge Allows Debtor To Recover Attorney’s Fees After Creditor Violated Automatic Stay, Kentucky Bankruptcy Lawyers Blog, published October 6, 2014.
Bankruptcy Court Allows Malpractice Plaintiff to Sue Surgeon in Bankruptcy, Kentucky Bankruptcy Lawyers Blog, published November 2, 2014.