Are Student Loans Dischargeable In Bankruptcy In Nevada?
Can Bankruptcy Help Me Get Out Of My Student Loan Debt?
Millions of Americans borrow money for college and university each year. In total, Americans carry over $1 trillion in student loan debt, a significant percentage of which is past due. When individuals are also facing high mortgage and rent, increased cost of living, medical bills, and other types of debt, repaying student loans can become almost impossible. Struggling families may wonder where to turn and whether filing for bankruptcy in Nevada can be a viable solution. In fact, overwhelming student loan debt is one of the most common reasons why individuals and families seek assistance from a bankruptcy attorney.
Student loans are in the non-dischargeable category of debt, partly because they are not tangible asset. Homes, property, vehicles, and investment accounts are examples of assets that can be sold or used to pay debts. In contrast, the training and information that is received in higher education cannot be transferred to another person or reclaimed in the same way.
That said, although student loans are technically non-dischargeable, there are options that may be available to some people that enable them to have their student loans discharged. These situations can be complex. Hiring a Las Vegas bankruptcy lawyer is your best option for pursuing the discharge of student loans in bankruptcy.
Factors The Court Considers When Determining Whether To Discharge Student Loans In Bankruptcy
The condition of “undue hardship” is not clearly defined in the law, but the Ninth Circuit Court of Appeals developed a test in the case Brunner v. New York Higher Education Corp. The case ruling indicated that three factors are required in order for student loans to be discharged:
- The debtor will be unable to maintain a “minimal” standard of living for themselves and their dependents if they are forced to repay the student loans, and
- That the individual’s current circumstances are likely to continue for the majority of the loan repayment period, and
- The debtor has already made a good-faith effort to repay their student loans.
Although it can be difficult to prove all three elements of the Brunner test, your bankruptcy attorney can walk you through the process and assist you in finding the evidence that will be needed to build a strong case on your behalf.
Student loans may be discharged on a limited basis in Nevada if the debtor can prove that repaying the loans would be extremely difficult. According to Section 523(a)(8) of the United States Bankruptcy Code, student loans are generally not discharged unless the debtor can prove that repaying them would cause “undue hardship.” This can be frustrating to people facing debt. Most people file for bankruptcy because they are facing severe financial hardship. Unfortunately, it is the court, not the debtor or their attorney, who determines what constitutes an undue hardship.
In particular, proving the second element can be difficult because most people’s income will increase over time. Factors that the court may consider will include:
- Serious mental or physical disability of either the debtor or their dependents, which may prevent employment or advancement in their career
- Obligations to care for dependents
- Severe lack of education
- Low quality of education
- Unusable or unmarketable skills
- Underemployment
- Income potential in the debtor’s career field has been maximized
- The debtor is approaching retirement age and cannot work through the expected repayment term
- Age or another factor that would prevent relocation or additional training to repay the loan
- Lack of assets to pay the loan balance
- Anticipated increase in expenses that would outweigh the potential increase in value of the debtor’s assets or income
- Lack of other financial options
If the debtor and their attorney can make a strong case to the court that the debtor is unable to repay the student loans and that their circumstances are unlikely to change, the court may rule to discharge the debtor’s student loans. A wide range of evidence may be required, depending on the circumstances that the debtor is facing.
What Are Your Options If You Can’t Discharge Student Loans In Bankruptcy?
Many debtors will be unable to meet the requirements of the Brunner test and will not be able to have their student loans discharged. Contacting a bankruptcy lawyer can help you find other solutions for student loan debt, such as debt settlement.
Filing for bankruptcy can still be an option even if you know that your debts will not ultimately be discharged. Once a bankruptcy petition is filed, an automatic stay is put into place, which temporarily prohibits creditors from collecting on debts. This can provide some relief that enables debtors to work through other options.
Filing a Chapter 13 bankruptcy can also be an option. In this type of bankruptcy, debt is restructured into a monthly payment plan that lasts 3-5 years and is based on your disposable income. This can reduce the burden of student loan payments while helping you pay what is owed in a more affordable way.
Get The Best Possible Outcome For Your Nevada Bankruptcy With The Help Of An Experienced Attorney
Although individuals can file for bankruptcy on their own, it’s always to your advantage to have a bankruptcy lawyer on your side. At Las Vegas Bankruptcy Lawyers, we can help you utilize your bankruptcy to your highest advantage while providing guidance and representation throughout the process. In more complicated situations, such as attempting to have student loan debt discharged, your attorney can provide invaluable legal advice and representation in court as they work to build a case on your behalf. The Brunner test is far from straightforward and will rely on the court’s subjective opinion based on the evidence and arguments your attorney can provide. An experienced bankruptcy attorney can work to convince the court that you meet all of the necessary factors for undue hardship. Contact us!
This article is provided courtesy of Blake Goodman, P.C., a leading bankruptcy attorney with nearly 35 years of experience in the field assisting individuals through filing for bankruptcy and other financial solutions.
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