California is home to some of the most respected colleges and universities in the country. In the Sacramento area, students have opportunities to enroll at institutions like California State University (CSU), the UC Davis School of Medicine, and the McGeorge School of Law at the University of the Pacific. Unfortunately, while there’s no arguing that students can receive a world-class education in California, there’s also no arguing that college can be expensive – sometimes, expensive enough to drive young people and their families into debt. However, under the right set of circumstances, Chapter 7 bankruptcy can relieve student debt by eliminating college loans. Continue reading to learn more from our Sacramento bankruptcy lawyers about eliminating student loans with Chapter 7 bankruptcy in California.
Student Debt Statistics: California vs. National Average
We usually hear about student debt in news articles and political debates. But for millions of families, the student debt crisis isn’t merely an argument unfolding on the television set – it’s a real, immediate financial burden that creates constant pressure simply to stay afloat. Student loans create an extraordinarily heavy debt burden for millions of young people and their loved ones, sometimes forcing students to drop out, change schools, or take on second jobs.
The problem isn’t getting better, either. On the contrary, our nation’s student debt burden – already in excess of $1.3 trillion – is growing heavier every day. According to a Forbes article published in February 2017, “Student loan debt is now the second highest consumer debt category – behind only mortgage debt – and higher than both credit cards and auto loans.”
Students in California may have it especially tough. While the average student loan debt per capita in California is “only” $4,160, which is $760 less than the national average of $4,920, the Institute for College Access and Success still ranks California among the nation’s top 20 states with the highest student loan debt, with average student loan debt of $22,191.
It’s obvious that student debt poses a major financial problem for tens of millions of people, including many who attended college here in California. The question is, what can graduates and their families actually do about it? It’s one thing to call your representative – but what if you need financial relief now?
Depending on your situation, Chapter 7 bankruptcy could provide the debt relief you need. Keep reading to find out how.
Eliminating Student Loans in Chapter 7 Bankruptcy
Bankruptcy is a legal process that allows single people, married couples, and business owners to reduce, pay off, or eliminate their debts according to their financial ability. Most people who file bankruptcy in California use a type of bankruptcy known as “Chapter 7,” which is also called “straight” or “ordinary” bankruptcy. According to the United States Bankruptcy Court for the Eastern District of California, Chapter 7 cases accounted for more than 6,300 of the 8,500 bankruptcy filings in the court’s Sacramento courthouse last year. In other words, about 75% of the people who filed bankruptcy in Sacramento during 2016 chose Chapter 7 bankruptcy.
Chapter 7 allows filers to wipe away many of their debts. Debts that can be erased in Chapter 7 bankruptcy are called “dischargeable debts.” Medical bills and credit card bills are key examples of dischargeable debts in Chapter 7.
Student loans are usually non-dischargeable in Chapter 7 bankruptcy, which means that in most cases, they cannot be erased by bankruptcy. However, exceptions exist that may apply to your situation.
If you can show that the debt is causing you undue (excessive) financial hardship by meeting certain standards under the “Brunner test,” the court may agree to discharge the debt and eliminate your student loan liability. To pass the Brunner test and discharge student loans in Chapter 7 bankruptcy, you must prove that:
- Repaying your loans is preventing you from attaining a minimum standard of living for yourself and (where applicable) your dependents.
- Your current financial circumstances are unlikely to change.
- You have made sincere (“good faith”) efforts to pay back what you owe.
Don’t assume that you’re stuck with your debts if student loans are causing you stress and anxiety. Reach out to our Sacramento Chapter 7 bankruptcy lawyers today to start exploring your financial options with confidence and peace of mind.
Sacramento Chapter 7 Bankruptcy Attorneys Can Help
If you’re struggling to keep up with your monthly student loan payments, you certainly aren’t alone. More than 44 million borrowers currently owe repayments on student loans, and many require some form of assistance. If payment reductions, administrative forbearances, and other solutions haven’t helped to get your college debts under control, filing Chapter 7 bankruptcy may be an effective financial strategy.
To learn more about filing for Chapter 7 in a free and completely confidential consultation, call the Roseville Chapter 7 lawyers of The Bankruptcy Group today at (800) 920-5351. We handle business and personal bankruptcy cases in the Roseville, Folsom, and Sacramento areas.