Is It Impossible to Discharge Student Loans?

It has been widely reported that student loans cannot by discharged, even by bankruptcy. People believe that the only way to get rid of their student loans is through full repayment or death. However, this "common knowledge" is not entirely true. Although it is very difficult to get student loans discharged through bankruptcy and your particular situation must meet the right criteria, there are people who successfully discharge their student loans through choosing bankruptcy every year.

The first condition a person must meet if they wish to have their student loans discharged after filing for either Chapter 7 or 13 bankruptcy is that they must be able to prove that their student loans cause them "undue hardship." Judges use a three-pronged test commonly known as the Brunner test to establish undue hardship. In order to prove hardship, the applicant must meet all three prongs of the test. They are as follows:

1) the debtor[s] cannot maintain, based on current income and expenses, a 'minimal' standard of living for [themselves and dependents] if forced to repay the loans

2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

3) that the debtor[s have] made good faith efforts to repay the loans

As you may have guessed by the three prongs of the Brunner test, "undue hardship" clauses are mainly used for people who people who have become permanently disabled and therefore unable to work. However there are other circumstances in which a judge may move to discharge your student loans. For example, a person who will be unable to provide necessities for his or her dependent children would be a good candidate to apply for undue hardship.

However, the difficulty of the undue hardship clause should not necessarily discourage you from trying to discharge your student loans. A recent study published by the American Bankruptcy Law Journal found that 39% of people who went through the process correctly were able to discharge their student loans. This directly contradicts the popular idea that it is impossible to get rid of your student loans.

If you find that your loans are causing you extreme financial hardship, you should consult an attorney experienced with bankruptcy. A bankruptcy attorney will be able to tell you whether or not your case has the potential to meet the three conditions for undue hardship and guide you through the process if it is. 

Tips on How to Increase Your Credit Score

Having a good credit score is very important. Those with good credit scores are able to obtain more credit at lower rates so that they can easily finance a home, car, and other major purchases. Those with low scores often have trouble obtaining credit and may find it harder to qualify for loans, rent apartments, and even get hired for certain jobs. So what steps can you take to increase your credit score?

The first thing you should do is request a free copy of your credit report. If you don't accurately know your credit score, you won't know what you're working with and what you can do to correct it. Fortunately, due to the Fair Credit Reporting Act, all three credit reporting companies (Equifax, Experian and TransUnion) are required to provide you with a free copy of your credit report once a year. You can obtain your free copy by clicking here. You will have to pay extra to obtain your actual credit score, however, the report will include valuable information such as your existing lines of credit and their standing, a list of people who have requested your credit report (such as employers), records such as bankruptcies, foreclosures, judgments and other overdue debt to collection agencies.