You Can’t Discharge Your Student Loans In Bankruptcy Because Of Panicked 1970s Legislation

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Even though bankruptcy should be seen as a final option for those drowning in debt, this action will not help consumers get out of giant educational loans. It wasn't this way always.

Students with a mountain of impending debt from student loans have very little options by way of forgiveness for their student debts. Bankruptcy is usually the last option.

Your mortgage and other loans can be thrown out with bankruptcy, however, the only way education loans will be discharged is it is proved that you have “undue hardship”.

 

This process is very arbitrary, says the "National Consumer Law Center."

It is under the descretion of the courts whether someone is in that bracket, and that bracket often is very vast, being that the bankruptcy codes don't give the definition of "undue hardship".

The NCLC gives a scenario that the court may rule that discharging the debt might be necessary.

“A 50-year-old student loan borrower earning about $8.50/hour as a telemarketer was granted a discharge. The court agreed that the borrower had reached maximum earning capacity, did not earn enough to pay the loans and support minimal family expenses and appeared trapped in a ‘cycle of poverty.'”