40,000 Student loan debt. Dead end job. No degree, can’t go back to school. Will bankrupsy work?

Diana:

As Suddenly explained, student loans are nearly impossible to discharge in bankruptcy.

In most bankruptcy court districts, the only way to discharge a student loan debt is for the borrower to satisfy a standard known as "undue hardship". The three factors of undue hardship are:

1. That the responsibility to repay the loan will make it impossible for the borrower to provide a minimal standard of living for herself and her dependents.

2. That the financial hardship is reasonably likely to remain in place for the entirety of the loan repayment period.

3. That the borrower has made a good faith effort to repay the loan.

That second standard is the killer, and the courts have pretty much held that this is only satisfied in a case where the borrower is terminally ill or permanently disabled, and completely unable to work.

The "undue hardship" standard has the functional effect of making student loans completely inescapable.

The bad news that you don't want to hear is this: The bankruptcy courts do not – and will not – hold the lenders responsible for ensuring that a student winds up pleased with how her education worked out.

When you signed your loan agreement(s), you didn't tell the lenders "I'll pay you back if it turns out that my education was useful", nor did their offer to lend say that you didn't have to pay them back if you weren't happy.

The lender is the "innocent" party here – they did what you asked them to do – lent you a large sum of money for school. You agreed to pay that large sum of money back, so no bankruptcy court is going to let you walk away from your side of the bargain.

As Suddenly said – you've completed 3 years of school, which means that you must be relatively close to finishing your degree requirements. The best solution may be to suck up this crappy job for a while longer, while focusing all your efforts on putting money aside to get back on track with your lender. If you're already in default, you'll need to investigate what your options are for getting out of default. It will take you less than a year to get your loans "rehabilitated", which will make you eligible for additional educational loans. If your loans are not yet in default, you need to make every possible effort to keep them that way. Either way – as depressing and stressful as I know it is – you'll need to deal directly with your lender.

I'm sorry that the news is disappointing, but I promise you that there is no 'escape' from your educational loans. You're going to have to face up to them, and deal with them, with the goal of getting back to a place where you can finish out your education, and improve your professional opportunities.

Good luck to you. I mean that.

You can't discharge student loans in bankruptcy. Sorry… Even then you'll still be in that dead end job. My advise is to get a second dead end job so you can get your transcript released and go back to school to earn that degree. You are almost there!!!