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Filer successfully discharges student loans in bankruptcy

College is rarely seen as an option, and is instead is typically considered a necessity for anyone in Washington who hopes to obtain a successful and well-paying career. Unfortunately, a high salary as a result of a college degree might not actually go that far when there are mountains of student loans that must be repaid. Student loans are not exactly known for their ability to be discharged during bankruptcy, but one graduate recently joined the ranks of those who have succeeded in doing so.

Admittedly, discharging student loans is still not a straightforward or entirely simple process, but it is possible despite some individuals who continually claim that it is not. While a somewhat formulaic approach might be utilized during bankruptcy proceedings, there are still real-life individuals in the Bankruptcy Court who will take a wide variety of factors and situations into consideration. This type of review typically leads the court to determine a debtor's ability to repay loans.

Records of a recent discharge of $204,500 in student loans indicate that a Bankruptcy Court sitting in Iowa considered a woman's long-time struggle with mental illness, including depression and anxiety. It was concluded that her mental health had played a negative role in her education and her retainability as an employee. The holders of the student loans, which included both the federal government as well as private loan holders, asserted that the debtor would probably be able to make substantial and regular payments in the future. The court disagreed, determining that was highly unlikely.

The prevalence of student loans as a serious and overwhelming form of debt has been rising drastically in recent years as the cost of pursuing higher education has skyrocketed. Many well-meaning students in Washington take out loans while attending college, only to later discover that these massive debts are well outside of their means to ever repay. Of course, scholarships and grants do minimize the costs for some and leave them with only minor loans to pay back, but those who are saddled with hundreds of thousands of dollars in student loans with outrageous interest rates are more likely to benefit from the careful discharge of these loans by documenting a specific case of hardship before the Bankruptcy Court.

Source: The Huffington Post, "Another Consumer Wins in Bankruptcy Court and Discharges Student Loans", Steve Rhode, Dec. 29, 2015

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