North Carolina Student Loan Debt Attorneys
More than half of people graduate from college or graduate school in North Carolina with a substantial amount of student loan debt. If your post-graduation income does not meet your expectations or you lose your job or encounter other unforeseen circumstances, you may fall behind on repaying your student loans and be at risk of defaulting. You may have questions about whether you can get some relief from your student loan debts and whether filing for bankruptcy is a valid option.
At Sasser Law, our three North Carolina board-certified bankruptcy attorneys have more than 20 years of experience helping people overwhelmed with student loan debt and other types of debt work through their financial issues. Our student loan attorneys strive to make the bankruptcy process understandable to you and to develop a strategy to ease your burden of debt. Bankruptcy is not appropriate for every individual in financial distress. It can be a challenge to discharge student loan debt through bankruptcy. But there may be ways to help you get some debt relief and stop creditors from pursuing you.
If you have questions about discharging your student loan debt, please contact a student loan debt lawyer at Sasser Law Firm to discuss whether your situation. Our attorneys handle Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases and have handled more than 8,500 cases of personal and business bankruptcy. Our attorneys represent individuals and businesses in Raleigh, Durham, Cary, Knightdale, Holly Springs, Apex, Fuquay-Varina and throughout the greater Triangle.
Are Student Loans Classified as Consumer Debt?
Whether student loans are treated as consumer debt or non-consumer debt is an important consideration in bankruptcy cases. The answer may determine whether you have the option of filing a bankruptcy case under Chapter 7 of the federal Bankruptcy Code. A Chapter 7 bankruptcy allows a quicker resolution than a Chapter 13 bankruptcy.
The federal Bankruptcy Code defines consumer debt as debt incurred by an individual “primarily for a personal, family, or household purpose.”
Courts in North Carolina have ruled that debt incurred for a business venture or with a profit motive in mind should be classified as non-consumer debt.
The bankruptcy court will examine your circumstances and how your student loans were used: Were the loans used to pay tuition and buy textbooks or to cover your rent and meals while you were a student?
The court will review the specific details of your situation and make an individual decision on whether your student loan debt is consumer debt or non-consumer debt. The court may classify student loans as either consumer debt or non-consumer debt.
Can Student Loans be Discharged by Bankruptcy?
As a general rule, student loans cannot be discharged in a bankruptcy case.
The only way you can have a federally subsidized loan or private student loan dismissed is to prove that paying off the student loan creates an undue hardship. But it is very difficult to discharge student loan debts.
Having said that, there may be another effective legal strategy to ease your debt burden if you are drowning in student loan debt and other types of debt.
Filing a Chapter 13 bankruptcy may buy you some time if you have fallen behind on paying your student loans. A Chapter 13 bankruptcy protects you from having to repay student loans during the pendency of the bankruptcy plan.
Our bankruptcy attorneys can review the specifics of your financial situation and discuss the best way to proceed in your case. We want what is in the best interest of our clients. We never pressure clients into filing for bankruptcy.
How to Seek an Undue Hardship Discharge
The courts in the Fourth Circuit, which includes the Eastern District of North Carolina, rely on a test called the Brunner Test to determine whether you cannot repay your student loans because it would pose an undue hardship.
If you are able to show undue hardship, your student loans may be restructured with new terms, partly discharged, or fully discharged.
The Brunner Test/Bankruptcy Means Test
The three-part Brunner Test requires that several conditions must be met to grant a discharge.
- You must prove that you would not be able to maintain a minimal standard of living for yourself and your dependents, based on your current income and expenses while repaying your student loans.
- You must demonstrate that your current individual financial hardship is expected to persist for a significant portion of the student loan repayment period.
- You must have made serious good faith efforts to pay the student loans prior to filing for bankruptcy.
Meeting all these requirements is technically feasible, but in reality, it is extremely difficult to accomplish. It will ultimately depend on your individual income and circumstances.
Student loan debts typically remain after a bankruptcy.
Examples of Student Loan Bankruptcy Case
Here is a legal strategy that the attorneys at the Sasser Law Firm have employed successfully to help a client burdened with substantial student loan debt. It might help you if you are struggling with unmanageable student loan debt.
You may file a bankruptcy case and discharge other debts, giving you more financial flexibility to concentrate on paying down your student loan debt.
In one case handled by Sasser Law Firm, a client had debts totaling more than $169,000 including nearly $90,000 in law school loan debts. The client’s goal was to get relief from other debts, so she could focus on repaying student loans.
Our knowledgeable student loan lawyers argued that our client’s debts were not primarily consumer debts because of the extent of her law school student loans. After hearing the client testify at a hearing about her reasons for going to law school, the bankruptcy court agreed that the woman’s student loans were incurred with the intent of pursuing a profitable career practicing law. Since our client’s intent in assuming student loan debt was profit-based, the court found that the law school student loan portion of her overall debt was non-consumer debt. Therefore, the client did not have to submit a means test for review, and she qualified for debt relief in a Chapter 7 bankruptcy case.
Keep in mind that this is not a case about discharging student loan debt. In fact, the woman’s student loan debt obligations remained after the Chapter 7 bankruptcy discharge of debts. But our client qualified for Chapter 7 to discharge her credit card debts and did not have to undertake a three-to-five-year Chapter 13 repayment plan.
Through the bankruptcy filing, our client was able to get rid of her credit card debt and then direct more income to repaying her student loans.
Statistics on Student Debt in NC
Student loan debt is increasing in North Carolina and across the United States.
North Carolina ranked 14th in the nation in average student loan debt per borrower in 2017.
The average student loan debt in N.C. increased by 3.5 percent for students graduating in 2017 compared to the previous class.
The average student in the class of 2017 who took out college loans had a debt load of more than $26,164 upon graduation, according to an annual report by LendEDU based on Peterson’s financial aid data.
Student Loan Attorneys Available to Help in Raleigh
If you are overwhelmed by student loan debt, please give the Sasser Law Firm a call to discuss whether a bankruptcy filing might help you regain control of your finances and make a fresh start. The N.C. bankruptcy lawyers at the Sasser Law Firm have helped people in situations similar to yours restructure their debt obligations and move forward without an unmanageable burden of debt.
We certainly understand the burden that student loan debt can place on you and your household finances. We are ready to help you explore your legal options to get some relief. We never try to pressure anyone into filing for bankruptcy. But we will be honest with you about the steps you need to take. A bankruptcy petition is a legal tool available to help honest people who are overwhelmed by debt rebuild their lives. We want what is best for each client. Contact us at (919) 336-0992 to schedule a free consultation with a student loan debt lawyer today.