Dallas, TX (PRWEB) December 08, 2011
Allmand Law successfully helped an overwhelmed debtor discharge all of their student loans in bankruptcy. Despite the difficulty of discharging student loans in bankruptcy, Allmand Law says that the recession is making a bankruptcy discharge more probable for some debtors.
“This debtor was simply overwhelmed by massive amounts of student loan debt. The bad economy made impossible for him to earn enough cash to pay his loans so he filed bankruptcy,” said Reed Allmand, the managing partner for Allmand Law. “The student loan debt was such a burden that the debtor even spoke of suicide. The bankruptcy discharge probably saved this man’s life.”
Student loans are some of the most difficult types of debts to discharge in bankruptcy. However, despite the difficulty of discharging student loans, it is not impossible to emerge from bankruptcy free of student loan debt. If the debtor can prove that paying the student loans create an undue hardship, the bankruptcy court is willing to discharge the debt. According to bankruptcy law, debtors who want to discharge their student loans must pass the Brunner Test, which includes three standards bankruptcy debtors must meet:
Inability To Pay
The bankruptcy debtor must prove that they cannot maintain the minimal standard of living for themselves and their dependents if they are forced to repay the student loan. Minimal standard is defined as basic living conditions considered acceptable in the debtor’s community. For example, if a bankruptcy debtor was unable to buy enough food to eat because they had to divert money to student loan payments, then they might meet this first standard for discharging the loans.
Situation Not Changing
The bankruptcy debtor must prove that their dire financial circumstances are not likely to change anytime soon. For example, if a bankruptcy debtor is in prison and not scheduled to be released for the next 25 years, there is no way they can pay their student loans. According to Allmand Law, this standard is relatively easy to meet for bankruptcy debtors who are either incarcerated or mentally/physically incapacitated; but it may be more difficult to prove if there is any chance that the debtor’s circumstances will change.
Debtor Tried To Pay Loans
The bankruptcy debtor must show that they made a good faith effort to pay their student loans. Meeting this standard means showing that payments were made over a significant amount of time. Debtors must show that there was an effort to increase income or reduce expenses and that they took advantage of the various payment options offered by lenders including consolidation.
Reed Allmand has taken note of how the recession is pushing more debtors into bankruptcy that previously paid their student loans on time. According to Allmand, many of those bankruptcy debtors meet all three standards required by the Brunner Test.
“The recession has created a situation where previously well-off debtors are forced to file bankruptcy because they have lost their jobs and remained unemployed or underemployed for an extended period of time,” Allmand said. “Some of that downward mobility is permanent because older debtors aren’t likely to make up the loss financial ground during the rest of their short working years.”
Reed Allmand is Board Certified in Consumer Bankruptcy by the Texas Board of Legal Specialization, the managing partner of the law firm Allmand Law and NACBA’s State Chair for the Northern District of Texas. He has been practicing bankruptcy law for nearly 10 years and has handled more than 3,000 bankruptcy filings. Allmand has appeared on “Money for Breakfast” on Fox Business News and is the author of “The Truth about Bankruptcy.” To speak with Mr. Allmand or to schedule an interview, please call (214) 265-0123.