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Why doesn't bankruptcy automatically erase my student loan debts?

Unlike credit card debt and mortgage debt, educational loan debt is held to a different standard during bankruptcy proceedings. Not all Garnerville residents who file for personal bankruptcy will see their student debt erased. In fact, having student loans discharged in bankruptcy requires a debtor to face his creditors and prove that repayment would put him into a financially challenging place.

Why doesn't bankruptcy automatically erase my student loan debts? The three-part test that a student loan debtor must satisfy to have his debts discharged includes the following requirements. First, a debtor must show that continuing repayment of his or her student loans would prevent them from experiencing an acceptable minimum standard of living. If a person is unable to pay for essential life needs, such as food and shelter, he or she may be able to satisfy this step.

Second, the debtor must be able to demonstrate that the aforementioned undue hardship would not be transient. The negative impact that his or her standard of living would experience through the continued repayment of their loans would have to endure through much of the repayment period of the outstanding obligations. A brief repayment period or short period of hardship may not satisfy this portion of the test.

Finally, a debtor has to show that they have tried, generally for at least five years, to repay their student loans. A debtor may not be able to have his loans discharged in bankruptcy if repayment of them only began in the year prior to the debtor's attempts to secure bankruptcy protections. A good faith effort must be made to pay off the debts during the repayment period.

While bankruptcy does not immediately discharge a debtor's student loans, discharge can be achieved if the debtor can satisfy the three elements of the discussed test. However, readers should be aware that every bankruptcy case is different. Discharge of a person's student loans will depend on the facts of each individual case and cannot be predicted prior to a bankruptcy hearing.

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