A question frequently asked of consumer bankruptcy law attorneys is whether a bankruptcy wipes out student debt. Unfortunately, in all but the rarest circumstances, it does not.
Out-of-control student loan debts are being decried by some of the candidates vying for the 2020 presidential election. The problem is quite substantial, with over 44 million borrowers owing at least $1.5 trillion for their unpaid student loans. On average, a graduating senior will walk away with more than $37K worth of student loan debt. In fact, student loan debts are now number two on the list of consumer debt categories. They eclipsed credit card debts and are second only to mortgages.
But just because student loans are rarely discharged in bankruptcies doesn't negate the relief that filing for bankruptcy can provide to some debtors with student loans. With other unsecured debts discharged in a bankruptcy, a larger percentage of a debtor's earnings can be used to pay off their accumulated student loan debts.
If you are a new graduate from a college or university, you may really be struggling to stay current on all your payments — rent or mortgage, student loans, credit cards, car payments, medical debt, child support, etc. It can be exceedingly frustrating to work all week only to see your earnings diminished without being able to divert some into a retirement account or simply have discretionary funds for some of life's pleasures.
That's why it's wise to take the bull by the horns now and resolve to get a firm grip on your financial responsibilities. Filing for a Chapter 7 bankruptcy now can pave the way for a streamlined financial future ahead.