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Student debt may be dischargeable in bankruptcy in some cases

Many borrowers in Louisiana and across the U.S. are struggling to pay down their student loans. According to personal finance website Make Lemonade, students graduating in the year 2016 had an average student debt load of $37,172, and $1.5 trillion is owed collectively by more than 44 million student loan borrowers nationwide. Typically, student loans are not dischargeable in bankruptcy, but there may be steps borrowers can take to have student loans discharged or to make their payments more manageable.

Since 2005, both privately and publicly backed student loans have been non-dischargeable in bankruptcy except in cases where the debtor can demonstrate that repaying would cause an undue hardship. All federal circuits other than the First Circuit and the Eighth Circuit apply the Brunner test when evaluating whether or not repaying would create an undue hardship. The borrower must show that there are extenuating circumstances creating a hardship for him or her, that the circumstances will likely continue for the duration of the loan term and that the borrower has attempted in good faith to repay the loan.

The process of discharge through bankruptcy begins with the filing of an Adversary Proceeding in bankruptcy court. Without going to court, student loan borrowers may be able to have their repayment terms redrawn based on their current level of income under plans like PAYE, REPAYE or IBR. Payment amounts will take into account family size, income and other factors.

In a case where a Louisiana resident is having difficulty making student loan payments, an attorney may be able to help. An attorney with experience in bankruptcy law might examine the facts of the borrower's situation and suggest options to reduce or eliminate debt. An attorney may be able to advise the client regarding whether he or she is likely to meet the requirements of the Brunner test or draft and file a petition to begin bankruptcy proceedings.

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