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    I’m drowning in student loans- can bankruptcy help?

    Student loans typically can’t be discharged in a bankruptcy. However, if you meet certain requirements, you may be able to discharge your student loans in a Chapter 7 or Chapter 13 bankruptcy. You may have a better chance of discharging your student debt if you attended a trade or vocational school. You can avoid repaying your loans if you can prove fraud, deceptive business practices, etc.

    How do I start the process?

    Your first steps will be to determine which chapter you want to file, hire an attorney, and file your bankruptcy petition. You will also need to file a Complaint to Determine Dischargeability. You (or your attorney) will need to prove in court that paying your loans will create an undue hardship. You may even need to have expert witnesses testify to your future employability.

    What is the Brunner Test, and how do I pass?

    The Brunner Test is used to prove that you are in a financial hardship that makes it impossible for you to pay off your loans. The Brunner test has three requirements: extenuating circumstances creating a financial hardship; the extenuating circumstances will continue for the rest of the lifespan of the loan; and the borrower has made good faith efforts to pay the loan. Factors that will be considered for the Brunner test include disabilities, lack of other options, how many working years the debtor has remaining, and obligations to dependents.

    Student Loan Default Rates in Arizona Rise Above the National Average

    Student LoansA college degree does not come cheaply. Often, graduates leave a university with a degree AND a hefty debt load. A successful career for many means the pursuit of a degree from a college or university. In fact, according to LendEDU, a consumer financial information company, 26,844 Arizona residents borrowed debt for student loans.

    Student loan debt held by Americans was $1.5 trillion in 2018. In 2020, no doubt that amount is higher. Student loan debt is the second-largest category of consumer debt. Where does Arizona fall in student loan debt?

    In Arizona, the national student default rate was at its lowest level in 2015. In 2016, the rate increased to 11.45%, one percentage point higher than the national average.

    Arizona, however, when compared to the nation, didn’t have a great of debt load as other states. Arizona has the eighth Lowes average student debt. That is an average student debt of $23,913 per borrower. This number is an increase from previous years. Basically, more than half of the graduating classes are graduating with debt.


    What happens to student loans if they aren’t discharged in bankruptcy . . .

                    . . . in a Chapter 7?

                    You will still owe your loans after your case is discharged. You will need to deal with your student loans separately.

                    . . . in a Chapter 13?

                    You can include your student loans in your payment plan, so the total amount you are paying will likely be less for the 3-5 year period of your bankruptcy. Student loans are treated as priority debts in a Chapter 13,  meaning the entire balance doesn’t need to be paid off during your bankruptcy.

    Student Loan Debt in Arizona

    Are government loans and private loans treated differently?

    No. You will have to prove undue hardship whether your loan is from the government or a private lender.

    What’s the best course of action?

    There are options besides bankruptcy to deal with your student loan debt. You can request an income-based repayment plan, that will use all your forms of income weighed against your family size and other factors. These plans typically last 20-25 years, and the remaining balance of your debt will be forgiven at the end.

    You also may be able to refinance your student loans. You should contact your lender to see what options are available to you.