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Student Loan Debt - Can You File Bankruptcy in Texas?
If you owe student loans, unfortunately bankruptcy will not provide you with much help. 11 U.S.C. Section 523 (a)(8) defines whether a student loan may be dischargeable. It states that a student loan cannot be discharged "unless excepting such debt from discharge . . . would impose an undue hardship on the debtor and the debtor’s dependants . . ."
When you read that paragraph, it’s very easy to think, “the $1300 I’m paying a month for my MBA is a ridiculous hardship! I can get my loan discharged!”
Unfortunately, that’s not how this provision has been interpreted. Discharging student loan debt is a complicated process that involves filing suit in bankruptcy court against the lender. In simple terms, you have to convince the judge that you will never be able to pay any amount towards the debt and also continue to eat.
I predict that within the next 10-12 years this harsh rule will be lessened. I say this because it’s possible that there could be an entire generation of highly educated 20somethings earning the equivalent of $40,000 per year, but living in poverty because of student loans. Once that happens, there will be the political will to change how and when student loans may be discharged, or partially discharged.