Student loans continue to be a significant financial concern for many people in Kentucky, even many years after graduating. Of course, there can be a number of factors contributing to an overall debt burden, including credit cards, medical bills, and mortgages. However, student loans are also some of the most difficult debt to eradicate, especially as it can be nearly impossible to discharge them in bankruptcy. Across the country, over 44 million people owe $1.5 trillion in student loan debt. This is the second largest category of debt in the United States, behind home mortgages and above credit card bills.

Student loans were more easily discharged before Congress passed laws exempting both private and federal loans from bankruptcy discharge. There are still some exceptions, even though they are infrequently recognized. A borrower would need to show undue hardship, a phrase which lacks a clear definition in the law. Most courts use a common test to evaluate whether a borrower has undue hardship. This test looks for special, extenuating circumstances that prevent borrowers from maintaining a reasonable living standard while paying off the loan.

These circumstances must not be fleeting but expected to continue for the length of the loan. In addition, the borrower must have made an effort to repay the bill. In order to seek to include student loans in a bankruptcy, a borrower must file a lawsuit in bankruptcy court that demonstrates why his or her circumstances meet this test for undue hardship.

Some student loan borrowers may have success under this stringent standard, but many people are also struggling with significant amounts of debt that are much more easily discharged in Chapter 7. A bankruptcy lawyer can explain the eligibility and other requirements of that chapter while exploring other methods of debt relief.