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Student loan debts can complicate bankruptcy

Many South Carolinians have experienced financial hardships due partially to mounting student loan debts. Some may file for Chapter 7 bankruptcy as a last resort to resolve their debts with the impression that it will solve their student loan issues along with their other obligations. However, student loans can be considerably more difficult to discharge in bankruptcy filings than other debts.

Student loan debts are not normally subject to automatic discharge in Chapter 7 bankruptcy aside from when they are used to attend unaccredited schools or the statute of limitations on a private loan is expired. Despite what some servicers may tell debtors in collection efforts, however, discharge of other loans is a possibility, and the ease with which a debtor can discharge a student loan debt often differs according to whether the loan was federally or privately funded.

To discharge a federal student loan, a court may require a separate adversary proceeding pertaining to the specific loan to provide clear evidence that the loan created undue financial hardship. Private loans might also be discharged through the use of an adversary proceeding, particularly if it is apparent that the school for which the loan was used was providing unqualified programs.

Student loan debts are under significant scrutiny in recent times, and the factors that make various student loans dischargeable in Chapter 7 bankruptcies may be subject to change depending on legal precedents set across the country. A bankruptcy attorney can often provide a client with the latest information regarding the approaches courts are applying to student loan obligations in current Chapter 7 cases.

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