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Can student loan debts be discharged through bankruptcy?

Many people in Long Island who wanted to go to college, but were unable to afford to do so, took out student loans to finance their education. These loans have made the dream of a college degree a reality for many students. Unfortunately, upon graduation, they also leave people deeply in debt. According to one source, on average, a person who took out student loans to finance college now owes $31,000.

In general, student loans are not dischargeable through bankruptcy. However, some people had luck discharging private student loans through bankruptcy by showing there was an "undue burden" and "extreme hardship." For example, one way to discharge student loans through bankruptcy is to make the argument that the loan was actually not to pay for the debtor's education. In this way, the funds more resemble consumer loans. This is an argument that can only be made on a case-by-case basis.

In another example, one medical student, who took out student loans later, found that his school was not accredited as they claimed to be. Due to the fraud, the student's degree was useless, and as a result, he was able to discharge his medical school loans through bankruptcy.

Therefore, although, under very specific circumstances, some people have been able to discharge their student loans through bankruptcy, it is not yet a given that all student loans can be discharged through bankruptcy. It is still a difficult goal to achieve. But, in the right circumstances, debt relief from student loans can be found in the bankruptcy process. And, should bankruptcy be unavailable, there may be other ways to achieve debt relief from student loans, such as income based repayment plans or out-of-court negotiations with lenders. Finally, even if one's student loans cannot be discharged through bankruptcy, by filing for bankruptcy, a debtor can free up the income needed to tackle their student loan payments.

Source: GoodCall, "Some Borrowers Get Student Loans Discharged in Bankruptcy Court," Terri Williams, Jan. 19, 2017

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