- 10
- February
2012
Last year total outstanding student loan debt incredibly surpassed $1 trillion - and the year before that, student borrowing was greater than $100 billion for the first time ever. This dramatic increase in student loan debt has some worried that we are on the verge of another economic crash on par with the home mortgage crisis, according to a new report and survey by the National Association of Consumer Bankruptcy Attorneys (NACBA) entitled, "Student Loan 'Debt Bomb': America's Next Mortgage-Style Economic Crisis."
Dischargeability of Student Loans in Bankruptcy
Generally student loan debt is not dischargeable in bankruptcy, which means the debtor will still be liable for the debt even after they file for bankruptcy. This rule does have limited exceptions though, such as a showing of undue hardship.
However, the inability to discharge student loan debt hasn't appeared to stop former students from considering bankruptcy. According to the NACBA survey, more than four out of five bankruptcy attorneys report that possible clients with student loan debt have risen "significantly" or "somewhat" in the last three to four years - with almost 50 percent of all attorneys falling into the "significant" category. Moreover, 95 percent of attorneys asked feel only a few students have any chance of discharging student loan debt using the "undue hardship" exception.
