Today, the Supreme Court denied an appeal which sought to make student loans more easily dischargeable in bankruptcy.
In a written order, the Court said that it would not consider the appeal filed by Mark Tezlaff, a 57 year old unemployed man from Wisconsin who owes more than $260,000 in student loan debt. In his court appeal, Tetzlaff said that his alcoholism, depression, criminal record, and bar exam failures prevented him from finding a job in his field and repaying his business and law school debt.
Tetzlaff filed a Chapter 7 bankruptcy in 2012. Chapter 7 normally wipes out debts such as credit cards, loans, medical bills, and other consumer debts; however, student loans are typically not dischargeable. A debtor must prove to the U.S. Bankruptcy Court that they have faced “undue hardship” and deserve a discharge (in full or in part) of his or her student loans, which is normally a difficult and expensive process that does not have a high success rate.
Since 2007, national student loan debt has more than doubled to $1.3 trillion, according to the Wall Street Journal. [Source: http://on.wsj.com/21HK8C0] The average college student graduating now will leave school with approximately $35,000 in student loan debt. [Source:http://on.wsj.com/1EwfnRF]
Until the law changes to make it easier for Americans to discharge their student loans in bankruptcy, there are still options in the bankruptcy code that can give you some relief from your student loans. A Chapter 13 bankruptcy can provide a sanctuary to protect you from aggressive collection efforts by your student loan lender including stopping student loan garnishments. A Chapter 13 is a debt repayment plan that typically lasts between 3 – 5 years. During this time, you can propose to pay back a percentage of your debt, making your student loan and other debt payments more affordable. If you are facing large student loan payments and your student loan company is not willing to work with you – or if they’re garnishing your wages – contact us today to schedule a free consultation to see if Chapter 13 bankruptcy could provide some relief.