Debtor with majority student loan debt exempt from bankruptcy income test

A recent Georgia Bankruptcy Court ruling provides help for people suffering from burdensome student loan debt. Generally, debtors who file for a traditional chapter 7 bankruptcy are subject to income testing, or “means testing,” to determine if it is fair for them to discharge their debt according to their income level or if instead they should pay some debt back in a chapter 13 bankruptcy case. Chapter 7 income testing only applies to bankruptcy filers whose debts are majority “consumer” debts, as opposed to business debts. The Federal Bankruptcy Judge in In Re Ruff, decided that because the bankruptcy filer took out the student loans to further her career as a profit motive, it was not a consumer debt, but more similar to a business debt. Therefore, her debt was over 50% non-consumer debt and she was not subject to income testing for chapter 7 bankruptcy. While student loans are generally non-dischargeable in bankruptcy, this court decision means that bankruptcy relief more accessible to people who may have a good income, but are still struggling with student loans on top of other debts.

If are struggling with hefty student loans in Georgia, bankruptcy could help eliminate your other debts and provide you with relief. Our experienced bankruptcy attorneys at Hurtt & Johnson, LLC can help. Initial consultations are free and confidential for individuals.