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Bankruptcy may be able to help those buried under student loan debt

According to a report recently released by the Institute for College Access & Success, roughly seven out of 10 college students graduated with student loan debt in 2012 - debt averaging an alarming $29,400 per graduate. Although the report found Connecticut students fared slightly better with an average debt of only $27,816, these numbers continue to indicate that many graduates are entering the job market already burdened with massive debt. Unfortunately, many of these graduates will soon discover that the hole created by their student loan debt is one that they cannot escape.

While many graduates would likely consider bankruptcy as an option to deal with their insurmountable debt, sadly, student loans are one of the few types of debt that are often not dischargeable during bankruptcy - meaning they typically cannot be eliminated. However, there are certain situations in which a Connecticut bankruptcy court will permit an individual to discharge student loans, so long as certain conditions are met.

Eliminating student loan debt during a Connecticut bankruptcy

When it comes to discharging debts during a Connecticut bankruptcy, particularly student loan debts, the graduate will have the burden of proving an "undue hardship" before the court will entertain his or her request. Specifically, Connecticut bankruptcy courts routinely apply the Brunner test - named after the case in which it was established - when determining whether student loans create this undue hardship.Essentially, a graduate seeking to discharge student loans in Connecticut must satisfy a three-factor analysis in order to demonstrate an undue hardship, which includes:

  • A showing that the graduate cannot maintain, based on current income and expenses, a "minimal" standard of living for himself or herself and his or her dependents if forced to repay the loans
  • A showing that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans
  • A showing that the graduate has made good faith efforts to repay the loans​
However, it cannot be stressed enough that even if the bankruptcy court does not find an undue hardship - and thus elects not to discharge student loan debt - filing for bankruptcy can still often provide some form of financial relief for graduates. For instance, bankruptcy can often discharge several other types of debt, such as medical bills and credit card debt. Once these debts are eliminated, it often frees up additional funds that the individual can then use to pay off student loan debt.

In the end, every debtor's situation is different, which is why it is best to consult with an experienced bankruptcy attorney if you are swimming in debt and believe bankruptcy can help. A skilled attorney can explain the bankruptcy process and help determine what debts may be discharged.