Getting an education is a crucial step to finding a successful career, but doing so without going into debt can be nearly impossible. College graduates in Connecticut tend to leave school with tens of thousands of dollars in student loans. With stagnant wages and perhaps less than ideal job opportunities, these individuals can quickly fall behind on their payments. Although student loans cannot be discharged in the vast majority of cases, bankruptcy can still be helpful.
In a study recently conducted by the online student loan marketplace LendEDU, it was determined that 32% of the people who file for Chapter 7 bankruptcy have student loans. Of those who do, student loans make up nearly half of their debt. These individuals could probably benefit from discharging their student loans, but most people do not understand their options for doing so.
While it is true that discharging student loan debt is extremely difficult, it is still worth exploring the option. A borrower must successfully demonstrate that repaying the loans would create an undue hardship. While there is no specific definition of an undue hardship, bankruptcy courts generally use the Brunner test when deciding whether to discharge student loan debt.
The Brunner test is comprised of three criteria, the first being that repaying student loans would not allow a person to maintain a minimal standard of living for him or herself and any dependents. The second criteria requires an individual to demonstrate that this financial hardship is not temporary and will last for the majority of the repayment period. Finally, it must also be shown that a person has made efforts in good faith to pay back the debt before filing.
It is usually an uphill battle to discharge student loan debt, but it can be a worthwhile fight. However, even if a person is unsuccessful in discharging his or her student loans, filing for bankruptcy can still create a more secure financial situation. After discharging debt through Chapter 7 or reorganizing through chapter 13, Connecticut residents often find that they can more easily manage their monthly student loan payments.