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Passing the Student Loans “Means Test” for Bankruptcy

South Carolina bankruptcy lawyerAchieving a higher education is a great way to position yourself for a prosperous life. It’s also a great way to put yourself deeply in debt.

Whether financing college, graduate school or another former of higher education, students pay a steep price. Statistics show:

  • Student loan debt for the Class of 2018 averaged $29,800.
  • More than 44 million borrowers collectively owe $1.5 trillion, making student loan debt the second-highest consumer debt category, trailing only mortgage debt – and more than either credit cards and auto loans.
  • It takes four-year degree holders an average of 7 years to pay off their loans. In other words, they can still be making payments while trying to meet the higher education bills of their children.
  • The odds are against you if you’re counting on public service student loan debt forgiveness. Of the 49,669 applications on record as of September 30, 2018, just 423 had been approved, with 32,409 rejected.

Is it any wonder many students in South Carolina consider filing for bankruptcy when the financial burden becomes unbearable?

Bankruptcy Options and the “Means Test”

One option is Chapter 7, which will discharge or forgive your unsecured debt like credit cards and medical bills.  This will give you some room in your budget to pay your student loans.  Student loans are not dischargeable except in very rare circumstances.

To file, you must pass the “means test.” The assessment is designed to prevent people with enough assets to pay their bills from trying to take advantage of the system by filing for bankruptcy. This is done by determining whether your income is lower than the median income in South Carolina for a household of your size. Taxes, childcare, health care, and car and mortgage payments also can come into play.

If you fail to qualify, you can file for Chapter 13, which allows you to reorganize and eventually repay your debts. Chapter 13 remains on your record for seven years, as opposed to 10 years for Chapter 7. In either case, attempting to borrow money could be an issue for many years.

Confused yet?

Don’t Dig a Deeper Financial Hole – Get Expert Advice

The South Carolina bankruptcy attorneys at Benjamin R. Matthews and Associates, LLC have handled thousands of cases since 1985. They understand the system – from how to pass the means test to dealing with the U.S. Department of Education’s Federal Student Aid office. Aware bankruptcy can cause emotional and mental stress, they will guide you with professionalism and compassion as you try to secure a solid financial future for you and your family. Take the first step by contacting them today for a free case consultation.

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