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Can Tennesseans discharge student loan debt through bankruptcy?

As college tuition and the cost of living continue to rise, more and more Americans are finding themselves with overwhelming student loan debt. With high interest rates, these debts can quickly spiral out of control and leave a borrower stressing over whether or not he or she will even ever be able to afford to pay it off. When such personal debt creates extreme financial challenges, these individuals may find themselves asking if they can discharge their student loans through bankruptcy.

Despite all the talk of the impossibility of getting rid of student loan debt, it is still possible, but it may be very difficult to achieve. There are two avenues a student loan borrower can take in effort to shed student loan debt. First is Chapter 13 bankruptcy. Through this process, a payment plan is set up that takes the debtor's income into consideration. However, once the payment plan has been completed, the debtor will still be responsible for paying back the remaining balance. This can be impossible, since interest rates will continue to balloon the student loan balance while Chapter 13 payments are being made.

The second option is Chapter 7 bankruptcy. Through this process, an individual seeks to eliminate his or her overwhelming debt through liquidation of his or her assets. Once assets are sold, proceeds are used to pay off debt, and then any remaining debt may be forgiven. In the student loan realm, however, the courts have made it difficult successfully file for Chapter 7 bankruptcy.

In order to attain debt relief through this process, an individual must show that his or her loan payments have imposed an undue hardship. Such hardship can only be shown if the debtor cannot maintain a minimal standard of living for both himself or herself and his or her family, the situation is likely to continue for a substantial amount of time during loan repayment, and the borrower has made good faith attempts to repay the debt.

Obtaining bankruptcy relief can be difficult when trying to discharge student loans, but not impossible. However, those facing financial challenges can stop creditor harassment, stop wage garnishment, and obtain debt relief by filing bankruptcy to discharge other overwhelming debts. This may provide an individual with the fresh financial start he or she needs to tackle his or her student loans in a way that is not oppressive.

Source: Hue Wire, "Student Loan Forgiveness Bankruptcy Law: It Just May Help You," Jun. 23, 2014

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Mark T. Young & Associates
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Hixson, TN 37343

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