college graduateThere are many events that can lead to people filing for bankruptcy. People can experience job loss or medical problems, or simply make the repeated mistake of buying more on credit than they are able to afford. The housing and financial crisis of 2008 led to many Americans having to file for bankruptcy, and experts are warning that the United States economy is on the precipice of a similar financial disaster in the future – a crisis caused by mounting student debt.

Getting a college degree is considered a necessity in today’s job market, but the costs of earning that degree are growing beyond most families’ means. The average American college student graduates with over $37,000 in student loan debt, and at approximately $1.4 trillion, student loans trail only home loans in the category of household debt. This is due in part to the tremendous ease with which college financial aid is available: students are offered credit with little done to gauge their ability to pay back their debts, and many of the students who are borrowing money don’t even end up earning a degree. This makes it even more of a challenge to pay off a loan.

According to the Brookings Institute, a good number of students who take out loans never end up paying them off, while others take up to 20 years to pay off their debts. Filing for bankruptcy generally does not discharge student loan debt, but that same debt has a significant impact on credit scores, making it much more difficult for those who carry it to be able to purchase a home, or even finance a car or get a credit card.

There are some instances in which student loans can be discharged in bankruptcy, but they are extremely rare and require extreme hardship. Though the definition of extreme hardship may seem applicable to you – they include being unable to maintain a basic standard of living if required to pay the loan back and honestly having tried to repay the loan – in practice they are interpreted as only being applicable in situations where the debtor can prove that they will never work again. Instead, you may be better off trying to renegotiate the terms of your loan.

For information about bankruptcy filings, we are here to help. Contact our office today to set up an appointment.

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