A Fresh Start for Millennials: Student Loan Debt and Bankruptcy

American student loan debt has hit crisis levels. Forbes reported student loan debt hit record levels in 2019. More than 44 million borrowers owe $1.5 trillion collectively. For Americans who are unable to get out from under their debts – which might include student loans, credit card charges, medical bills, auto loans, and more – the only (or best) option might be bankruptcy. However, student loan debt and bankruptcy are tricky. To have your student loans discharged, you must meet a very high burden.

Experienced bankruptcy attorney Adrienne M. Hines is here to help when you are struggling to pay your debts. To schedule a free consultation with a skilled Ohio bankruptcy attorney, contact Kademenos, Wisehart, Hines, Dolyk & Wright Co. LPA at (419) 871-9015, or through the online form.

A Look at Student Loan Debt

Student loan debt is now the second greatest type of consumer debt following mortgage debt. Overall, Americans have more student loan debt than credit card debt or auto loans.

The greatest increase in student loan debt in recent years, based on dollars, was among 30-39-year-olds, Forbes reported. As of 2017, people in their 30s owed $461 billion. Americans under 30-years-old owed $383.8 billion. These age groups are predominantly made up of Millennials, which Pew Research defines as being born between 1981 and 1996.

The total amount of debt is not the only worry, though. The real issue is American’s inability to keep up with their minimum student loan payments. In combination with rising housing costs, health care prices, and overall inflation, many Americans now have trouble meeting their monthly expenses – let alone pay off debt.

This is evidenced by how many borrowers are in default or have managed to put their loan payments on hold. The amount of direct loans in default equals 5.1 million borrowers and $101.4 billion. Direct loans in forbearance (during which interest still accumulates) equals 2.6 million borrowers and $111.1 billion.

Student Loan Debt and Bankruptcy

Pursuing bankruptcy in the hopes of discharging your student loan debts is a challenge. Since 1976, the general rule is that student loans are not dischargeable in bankruptcy. This may be because Congress was concerned about individuals taking advantage of bankruptcy to get out of debt that they intentionally accumulated to earn a degree.

That being said, it is not impossible to discharge student loan debt, especially with the help of an experienced bankruptcy lawyer. Since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, student loans have been dischargeable if borrowers can prove undue hardship.

For a bankruptcy court to discharge your student loans, you must prove the debt imposes an undue hardship on you and those dependent on you. How you prove this depends on the jurisdiction.

The Brunner Test

Ohio uses the Brunner Test to analyze undue hardship. This is the most common standard used by courts. You must meet three factors to prove undue hardship:

  • Based on your income and expenses, it is not possible for you to maintain a minimal standard of living for you and your family if you continue to pay your loans.
  • Your current financial situation is unlikely to change during the loan’s repayment period.
  • You have made a good faith effort to pay your student loans.

This is a high threshold to cross. Student loans have long repayment periods, and you must show that your circumstances are never going to improve to such an extent that you can pay your loans on top of your normal expenses and avoid poverty.

Talk with an Ohio Bankruptcy Attorney About your Student Loan Debt

For an objective look at whether you can meet the undue hardship burden in bankruptcy court, you should speak with bankruptcy lawyer Adrienne M. Hines at Kademenos, Wisehart, Hines, Dolyk & Wright Co. LPA. She has experience in helping individuals and couples of all ages through Chapter 7 and Chapter 13 bankruptcies. She understands the process of establishing undue hardship in relation to student loan debt.

To schedule a free bankruptcy consultation, submit your information through the online form, or by calling (419) 871-9015.