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According to a recent study by WalletHub, the state of Texas ranks as number nine in the list for the “best” student loan debt. WalletHub analyzed all 50 states (including the District of Columbia) using 7 key metrics, including average student debt, unemployment rates, and students with past-due loan balances.

Though nine out of 51 may be good news for the Lone Star State, the rest of the country is not doing as well. As of June 2014, the Federal Reserve Bank of New York, total outstanding student loan debt stood at $1.12 trillion, an increase of $7 billion from 2013.

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federal student loan IMAGEA rising number of recent graduates are finding themselves buried in student loan debt. Sadly, sometimes this situation leads to other types of debt. Trying to make monthly student loan repayments, you might find yourself relying on a credit card to help you purchase necessities like groceries. This chain of events might make your financial situation very serious, leading you to consider bankruptcy. If you’re considering bankruptcy primarily because of student loan debt, there are a few things you need to know about how student loans are treated in bankruptcy court.

You might be able to discharge your federal student loan debt in bankruptcy, but this does not apply to every case. You have to prove to the court that repaying those student loans would result in undue hardship. This generally happens through an adversary proceeding in your bankruptcy court, and the following three criteria must be met:

  • court has to see that paying your loan would keep you from a minimal standard of living;
  • that your financial situation outlook appears like it will continue for the length of loan repayment; and
  • the court wants to see that you have made efforts to repay the loan before heading to bankruptcy court.

You have to demonstrate all three of these factors in order for your loans to be completely discharged. If your discharge is approved, all collection activity on your federal student loan account will stop.

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