A New Hope for Discharging Debt?

Posted on October 22, 2014 at 9:44am by

Kansas City Bankruptcy Attorneys Analyze a Potential Solution

It has been a few years since Occupy Wall Street reached its zenith, and one offshoot of the movement is still working to represent the needs of the 99 percent. Rolling Jubilee, a group formed by former Occupy activists, is paying large portions of students’ unforgiven debt. A recent NPR article describes how one student received a letter in the mail explaining that $790.05 of her debt had been covered by Rolling Jubilee.

What Can I Do About my Student Loan Debt?

So far, the group has covered $15 million worth of student loan debt across the nation. The group, which has Christian ties, says that the word “jubilee” refers to Biblical times: every 49 years, a “jubilee” occurred that erased everyone’s debt. Considering that Americans owe a total of $1.2 trillion in student loan debt, Rolling Jubilee members have their work cut out for them.

For some students, a Chapter 7 or Chapter 13 bankruptcy is a good option.  In addition to eliminating other debt, if the student can show that paying their student loan debt constitutes an “undue hardship,” the bankruptcy court may discharge some or all of what their student loan debt.

What is an “Undue Hardship”?  

Different courts use different methods of determining “undue hardship.”

The Totality of Circumstances Test, the test used by the 8th Circuit, which includes Missouri, takes into account all of the student’s income, expenses, and other relevant circumstances such as disabilities, age, monthly payment amount, and total amount of student loan debt to determine whether or not the student loans place an unreasonable burden upon a student.

The Brunner test is utilized in the 10th Circuit, which includes Kansas.  The Brunner test consists of three basic factors:

  • Good faith – you have made an honest effort to repay your loans;
  • Poverty – your income levels and expenses makes it impossible for you to pay loans and maintain a minimal standard of living; and
  • Persistence – your current, untenable situation is unlikely to improve during the life of your loans.

Students with low income and substantial amounts of student loan debt usually have the best chances to have their student debt discharged.

Can Bankruptcy Forgive Student Loan Debt?

Even if a student is not the ideal candidate for a bankruptcy discharge, he or she may be able to file a bankruptcy to discharge other debt, which helps by freeing up other money currently being used to pay other debts.  That money can then be put toward student loan payments.  Another option is to file a bankruptcy and adversary action within the bankruptcy to be used as a settlement tool.  Once the adversary action is filed, the lender may be willing to lower the monthly payment, discharge a portion of the debt, or lower the interest rate.

By speaking to a bankruptcy attorney in Kansas City, you can get a clear picture of your financial outlook and receive advice for the best solution for your specific scenario. Even if a philanthropic advocacy group like Rolling Jubilee does not come to your rescue, there are still options for regaining financial stability in your life.

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