The standard to get rid of student loan debt in bankruptcy is “just exceptionally high,” Todd Brown told the Buffalo News in an article published on October 8, 2011. “Most other kinds of debt you don’t have to jump through those hoops,” said Brown, an associate professor at the University at Buffalo who practiced bankruptcy law.
The Buffalo News story is another in the spate of articles about the increase in college graduates filing for bankruptcy. A study released by the Institute for Financial Literacy in September found that from 2006 to 2010, bankruptcy filings increased 21 percent among those holding a bachelor’s degree. Even if “a bachelor’s degree is the new high school degree,” the Buffalo News also noted that those with master’s degrees or higher rose at a similar rate.
Even before the Financial Literacy study, CBS News reported on July 31, 2011, that bankruptcy is not an option for the more than 500,000 students who have defaulted on their student loans since 2008. The college graduate profiled by CBS is paying $160 per month on her federal loans and $800 per month toward a private loan, even though both loans were for the same amount of $40,000. Lauren Asher with The Institute for College Access and Success told CBS that private student loans are much more like a credit card or sub-prime mortgage as they tend to have variable rates and have no consumer protections. “Some people say it’s like graduating with a mortgage and you don’t have a house,” Asher said.
Sallie Mae, the nation’s largest provider of educational loans in the United States, notes on their website that several laws were passed in the 1990s that made student loans ineligible for cancellation in bankruptcy. Before you even consider a bankruptcy means test , you should speak with a Chicago bankruptcy attorney to make sure that filing is in your best interest. Our firm strives to help all clients become debt free and credit rich, but recent college graduates should remember that neither Chapter 7 nor Chapter 13 bankruptcy will discharge your student loan debt unless you are physically unable to work. If you have additional questions, contact our office today to set up a free consultation.
Benjamin Brand Services – Chicago bankruptcy lawyers