One of the problems with bankruptcy today is that it doesn’t address the looming problem of student loans. For many people in America who have crippling debt, the issue isn’t that they don’t make enough money or that they aren’t good with it. The reality is that their student loans can cost them as much as a mortgage payment each month, straining their finances significantly.
It’s not unusual to see that many people carry debt in the form of student loans. For one in three consumers, student loan debt makes up around 49 percent of their debt, leaving them with as much as half of their debts untouchable through bankruptcy. Presently, bankruptcy does not allow the discharge of many student loans.
Nationwide, it’s believed that around 21 percent of all debt comes from student loans. To discharge student loans in bankruptcy, the person has to prove that they are facing undue hardship using the Brunner test. Essentially, you must prove that you can’t meet the minimal standard of living while repaying your student loans. Additionally, you have to show that the hardships will continue and that you’ve made an effort to pay back your loans in the past.
Student loans used to be dischargeable, but that changed in 1976 when the people in power began to make changes. Today, that issue might change again. Some lawmakers are considering eliminating the past restrictions with the proposed Student Borrower Bankruptcy Relief Act of 2019. Keep updated on this potential act, because it could make a major difference for you in the future.