Under the heading of don't believe everything you think, it appears many people continue to erroneously believe student loans can't be discharged in bankruptcy. And a recent influx of student loan assistance companies that are selling their help are also perpetuating that myth.
Generally the elimination of student loans in bankruptcy requires the individual to prove they create an undue hardship, that is a standard that generally requires an underlying medical condition, but my research is showing that is not always true.
However there are some private student loans, even Sallie Mae student loans, that are exceedingly easy to discharge in bankruptcy without any hardship.
Bankruptcy is a legal solution carried out by a licensed attorney to help give people buried in debt a fresh start and second chance in the face of an unreasonable or unfortunate financial situation. In all of my decades of helping people find good solutions for their problem debt I've run into very few people who were not in terrible situations, most often beyond their control. In fact most waited too long to file bankruptcy.
I've spent quite a bit of time reviewing 2012 bankruptcy filing data and looking at actual cases. My goal was to examine real cases and get a clearer idea about what reality was instead of just assuming there was no hope in dealing with student loans in bankruptcy.
I go into excruciating painful detail about the technical facts about why these loans are easily discharged in this article which you should read to find out if your private student loans would be part of this "easy to discharge" category.
But to give you the bathroom reading snapshot on this matter, just read the bullet points below.
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What was most surprising in my continuing research on this subject is how infrequently bankruptcy attorneys appear to use the unqualified institution or unqualified expense argument to discharge the student loans.
One reason this has probably not been tried more often is bankruptcy attorneys are hesitant to move forward with an adversary proceeding to get student loans discharged. Many tell me the cost of moving forward with this action is very expensive for the client.
But for loans that fall into the category I'm describing the amount of effort and filings after proceeding with the adversary proceeding with the court to grant the discharge in bankruptcy is extremely minimal.
The reason seems to be the proof is readily apparent the private student loan is eligible for a discharge and the lenders don't appear to dispute it at all in the cases I've examined. The discharge is granted quickly, regardless of how big the loan amount is.
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