An article in Missouri Lawyers Weekly highlighted the recent success of our Kansas City bankruptcy lawyers in settling a client’s student loan debt. The case illustrates how filing for consumer bankruptcy can provide a solution for what may seem like an impossible financial obstacle to individuals struggling to pay back their student loans.
A Notable Victory for Student Loan Debtors Filing Bankruptcy
Our client owed more than $400,000 in student loan debt after studying for a chiropractic degree. In addition to watching her startup chiropractic clinic fail, she also contracted viral meningitis and began suffering numbness as well as pain in her arm. These medical misfortunes, combined with the economic downturn, left her unable to make payments on both her student debt and medical bills.
The combination of her student loan payments and living expenses meant that our client’s monthly net income, after paying for her living expenses, was only $72. In light of this, she filed a Chapter 7 bankruptcy with the hope of getting some of her debts discharged.
Neil S. Sader and Megan D. Dennis of the Sader Law Firm represented her throughout the bankruptcy proceedings. They argued that the repayment of the loans would constitute an undue hardship to their client, given her health condition and the roughly $2,300 per month accrual of interest on her student loan debt. All of the parties involved in the bankruptcy came to an agreement to discharge the debts for the sum of $150,000.
The settlement relieved the 50-year-old Missouri woman of close to 40 percent of her debt load, with an additional discharge available if she completes the monthly payments of her debt settlement over the next ten years. In this case, Kansas City bankruptcy attorney Neil Sader stated, “This debt was destroying [the client’s] life and her ability to function.” A discharge of her debts so that she could survive “is what bankruptcy is for,” he continued.
The Difficulty of Student Loan Discharges
The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 made student loans non-dischargeable except when paying back the loans would inflict “undue hardship.” In the bankruptcy courts of Missouri, this hardship is determined with the “totality-of-the-circumstances” test.
Unlike other state courts that utilize the “Brunner” test, individuals who choose to file bankruptcy in Missouri and want to seek a discharge of their student loan debt may have a greater chance for dismissal than previously thought. Factors the 8th Circuit Court in Missouri consider when determining your eligibility to discharge student loan debt include your past and future financial resources, your ability to pay the living expenses of you and your dependents in addition to other issues specific to your bankruptcy case that may also prevent you from making payments.
We Offer Solutions for Student Loan Debt Relief
The Sader Law Firm stands ready to help individuals and families in Missouri and Kansas find relief for their financial struggles. No matter the source of your debt problems, our Kansas City bankruptcy lawyers will work with you to find the solution that best fits your situation. If you are suffering from overwhelming credit card debt, an underwater mortgage or student loan payments that threaten to ruin your life, contact our office today.