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Student Loans Can be Discharged in Bankruptcy
31 points by will_brown on Sept 10, 2013 | hide | past | favorite
I felt compelled to address this issue as the result of (https://news.ycombinator.com/item?id=6355936)

It's pretty well known by now that student loans cannot be discharged through the normal bankruptcy process.

Instead, Congress requires student loan borrowers to initiate an adversary proceeding, a separate lawsuit filed within the bankruptcy case, to prove that repaying their student loan debt would be an "undue hardship." In the absence of any further guidance from Congress on what constitutes an undue hardship, most courts now apply what is called the "Brunner standard."

That standard requires a borrower to prove three things: One, that the borrower and any dependents cannot maintain a minimal standard of living based on current income and expenses; two, that additional circumstances indicate this is likely to be the case for a significant portion of the borrower's repayment period; and three, that the borrower made a good faith effort to repay the loans.

Here is an interesting article that claims one of the greatest reasons people do not avail themselves to this legal mechanism is because the urban myth student loans can not be discharged -http://www.huffingtonpost.com/steve-rhode/bankruptcy-student-loans_b_2416031.html

My goal is only to highlight this myth, not to argue the existing system is perfect. To that end I will leave links to 2 possible legislative solutions The Private Loan Bankruptcy Fairness Act of 2013 and The Fairness for Struggling Students Act of 2013. - http://www.govtrack.us/congress/bills/113/hr532 -http://www.govtrack.us/congress/bills/113/hr532

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