Dealing With pupil Loan Debt and Bankruptcy

America Student Loans - Dealing With pupil Loan Debt and Bankruptcy

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The association between student loan debt and bankruptcy is a complicated one. Sadly in many cases today, these loans are becoming one of the top causes of bankruptcy in college-attending Americans. With debt of this kind soaring, even exceeding the levels of credit card debt in America for the first time in history, it is the right time to start good comprehension the association between these two financial forces.

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America Student Loans

Debt and Bankruptcy

Sadly, student loan debt cannot be discharged in bankruptcy filings (though there are some exceptions), despite the fact that student debt pushes many into filing in the first place. Instead, the prevailing wisdom about student loan debt has been to forgive it, allowing students to pay off 10 percent of their wage over the policy of 10 years, and then forgiving the rest. Some call this the 10-10 standard. Others would like the forgiveness idea to be overturned and a more direct line between these types of loans and bankruptcy to be restored.

Exceptions to the Rule

In most cases, student loans are not taken away by bankruptcy, but there are exemptions in place.

One of these conditions is referred to as the "undue hardship exception" and requires those applying for this exception to demonstrate that it would be an unnecessary hardship for them to pay off their loan amounts, no matter the level or rate. Essentially, someone attempting to get this exemption would need to show that they would be unable to provide for their dependents or themselves unless their student loan debts are allowed under the conditions of bankruptcy.

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