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Student loan debt may be hard to get rid of

The Federal Reserve chair acknowledges that there is little he can do to help student loan borrowers in Massachusetts and elsewhere in the United States. However, he did say in testimony to the Senate Banking Committee that he wasn't sure why student loan debts couldn't readily be discharged in bankruptcy. He also said that student loan debt could have a negative impact on a person for his or her entire life.

Currently, student loan debt can only be discharged if forcing a person to make payments would cause an undue hardship. There is no set standard for what an undue hardship is, but courts generally assume that it is a high standard to meet. Over 40 million Americans have student loans, and their combined debt is roughly $1.4 trillion. In addition to having negative consequences for an individual, the Fed chair expressed concern that it could have a negative impact on the entire economy.

Filing for bankruptcy may make it possible for an individual to obtain debt relief in a variety of ways. For instance, student loan or other debt may be discharged, which means that a debtor no longer has to make payments on it. It is also possible for debt to be reorganized and repaid over the course of three or five years.

Those who decide to ask for bankruptcy protection may be entitled to keep some or all of their property. In Chapter 13 cases, creditors generally cannot move to foreclose on a home or repossess a vehicle. This may make it possible for a debtor to catch up on those or other debts that may have been neglected in favor of making student loan payments. If loan balances remain after the end of the repayment period, they may be discharged.

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