Student Loan Bankruptcies May Be Hard Cases

Often people get swept so far into debt for any number of reasons – reasons sometimes not entirely the fault of the consumer – bankruptcy is the only way out. The promise of a fresh financial start for a debt-burdened consumer is very enticing. Though this may be true, discharging a bankruptcy puts a big smudge on a credit history and it stays there for a long time.Student Loan Bankruptcies Need to Be ConsideredOne should consult with an attorney specializing in such matters or a personal finances counselor before declaring bankruptcy. All debts should be considered – including student loans – because, while some debts can fall under the bankruptcy axe, there are those that will not. And student loans taken before the bankruptcy may be among them. Upon examining the total range of credit obligations, it may be that practically all of them are exempt from bankruptcy discharge. If that is the case, it may not be prudent to declare bankruptcy at all.Getting the Axe with Student Loan BankruptciesA wide variety of debts that have gone bad cannot be discharged or eliminated simply by making a declaration of bankruptcy. Some examples include obligations for child support, government taxes, any fines or fees associated with criminal activities including driving while intoxicated, and there are other debts that may not be discharged according to the laws of the various states. Special consideration should be given to student loans. Many of them, especially those that are backed by government plans, cannot be discharged.Student Loan Bankruptcies Offer Incentives to LendersStudent loans have helped many attain a higher education in the past and should continue to do so in the future. When legislation was passed regarding student loan bankruptcies, legislators wanted to nudge lenders into granting student loans, so they made student loans almost impossible to discharge under bankruptcy. Of course, this adds a good deal of security to the lending institutions that offer such loans and helps ensure a steady stream of student loans into the future.Student Loan Bankruptcies and Hard CasesTo get a student loan discharged under bankruptcy one would have to prove to the bankruptcy judge that making the loan payments would be an excessive expense that would not allow even a bare minimum quality of living. An individual must be in an extremely poor financial situation to get a student loan removed completely and must be able to prove the hardship. Though the indicators of hardship may be marked by certain legislative guidelines, it is still a very subjective evaluation.Pleading the Hard CaseYes, it is incumbent on the filer to prove hardship to a judge, and what the judge may think of the particular situation is unpredictable. And the person pleading for discharge would also have to prove that they have made fair attempts to pay on the student loan. Sometimes though, the reason to dismiss student loans is obvious because of debilitating injury or severe illness.Managerial Student Loan BankruptciesIf it becomes clear to the bankruptcy judge that declaring bankruptcy will not allow the debtor any relief because they are carrying so much debt exempt from bankruptcy discharge, the judge could declare any part of the debt excused through what is called a managerial discharge. The actual possibilities associated with being approved are still steep, but it could still be useful to plead for this sort of discharge.