Collectively, current and former students in Illinois and across the country are carrying student debt of $1.59 trillion. Many of these borrowers are struggling to stay current with their repayment obligations, and some are considering bankruptcy as a way out. Bankruptcy may successfully discharge many different types of debt, but student loans are among the most difficult to discharge.
Chapter 7 bankruptcy may allow for the discharge of student debts, but the borrower has a hard road to travel. The person must pass the means test; this compares the income of the bankruptcy filer, also referred to as the petitioner, to the median income for comparable households in the relevant state. After passing the means test, the petitioner will have to demonstrate that he or she will be unable to pay off the student loan debt or that paying it back would be an undue hardship.
Most bankruptcy courts use the Brunner Test to decide whether student loans will be dischargeable in a particular case. The Brunner Test requires the petitioner to establish that he or she has made reasonable efforts to repay the debt and will not have a reasonable standard of living if forced to pay. Furthermore, it’s necessary to show that the current hardship will continue for most of the period of repayment. It can be difficult for petitioners to establish these Brunner requirements to the satisfaction of the bankruptcy court.
People in Illinois who are having trouble paying off their debts every month might want to get legal assistance. A lawyer who has experience with Chapter 7 or Chapter 13 bankruptcy could help by examining the person’s assets, income, expenses and liabilities and putting together a plan to reduce or eliminate debts. The attorney might help the client file a petition for bankruptcy or complete requirements like pre-bankruptcy counseling.