Bankruptcy Indiana

As a debt consolidation lawyer in Indiana, I help clients with many different kinds of debt. Unfortunately, one category of debt for which filing bankruptcy has not been able to be of much help is student loan debt. The Columbus bankruptcy lawyers who work in my office there report having exactly the same frustration when former students turn to them for Indiana bankruptcy help with student loans.

Student loans are unsecured loans.  As money-zine.com comments, unlike a car loan or home mortgage, where the property itself serves as collateral for the loan, with a student loan there is no collateral - "You cannot unlearn what you were taught, and no one is taking your college diploma from you."
 
In an effort to prevent graduates from simply walking away from their student loans, the government made a big change in the law back in 1998, making it extremely difficult to have a student loan discharged in bankruptcy.

In fact, only in cases where three things can be proven is there a chance for a discharge of student loan debt:

• If you repay the student loan, you would not have enough money left over to lead even a minimum lifestyle.
• Your financial hardship is likely to continue for a significant period of time.
• Before filing bankruptcy, you made a good faith effort to make payments on the student loan over at least a five year period of time.

According to the Indianapolis Star," Indiana students are leaving school with more debt than ever before." The nonprofit Project on Student Debt reports Indiana students graduate with debt ranging from $25,000 to $36,000. My own experience bears this out - with bankruptcy law offices serving 38 counties, I'm seeing graduates (or parents of graduates!) every day asking me whether bankruptcy can provide them any relief from student loan debt.

My answer is a combination of "Yes" and "No".

No, because, as I explained, student loans are almost never dischargeable in bankruptcy.

Yes, because, when you file bankruptcy, what could happen is that harassment by debt collectors for the student loans will be put on hold for up to five years.  Some of your other debts might be discharged in bankruptcy, freeing up money to pay on the student loans.

Robert Applebaum, an attorney from New York, I learned, is campaigning to have the government cancel student debt to stimulate the economy.  "It's frustrating," says Applebaum (who has a very large student loan debt himself) "to be a society in which you need the educational credentials to succeed, but to get them, you have to put yourself in so much debt that you lose your independence in the process."