Bankruptcy is a valuable and legitimate tool for helping people who fallen on hard times financially to erase their debts and start over fresh. But some debts can�t be wiped out, at least easily, through bankruptcy. Debt from student loans is one of those. Even if you are one of the lucky ones able to get the debt erased, the time and money it costs will most likely make the victory pointless.
A �success� story
Look at the example of Michael Hedland who was lucky enough to successfully erase some�only some�of his student debt in court. It took the Hedlands and some pro-bono attorneys ten years just to have 50,000 dollars� worth of student debt removed. While businesses can erase millions in debt in a matter of months, the courts make it much more difficult for people who take a financial risk for education purposes.
Why it�s so difficult
There are two main factors that make it difficult for those hoping to expunge student debts. The first is that the person, who is already in a very difficult financial state, has to go up against the government affiliated companies that provide the student loans. These companies have top-of-the-line legal teams.
The second factor is that in order to get rid of student debt, a person must prove that they are truly destitute and unable to repay their debts and won�t be in the foreseeable future either. This is known as the Brunner test. While that may sound easy enough for many recent graduates, the courts have a very strict standard for determining this. Consider the case of Royale Robinson, a 55-year-old woman with 143,000 in law school debt. She was unemployed, in and out of homeless shelters, being treated for cancer, and was living off 1,000 a month in disability payments while having nearly 2,000 in expenses each month. The court ruled that she didn�t meet the criteria of the Brunner test.
Making it easier
The problem with the Brunner test was then it was created in 1987. Since then, the national average for tuition has gone up by 112% while the average household income has only grown by 2.1%. While it may have been effective at one time, a new and improved Brunner test might be in order. One that makes it a little more fair for student borrowers but not so lenient that lenders hesitate to give money for student loans.
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Source: http://www.demos.org/blog/8/1/13/why-escap...kruptcy-so-hard