While the Scottsdale economy is trying to recover from the damage of a mortgage crisis, another huge threat to the economy is looming ever closer. The National Association of Consumer Bankruptcy Attorneys recently referred to the national student loan as a debt bomb.  In the previous month, the Federal Reserve Bank of New York stated that the total student- loan had amounted to $870 billion. The loan amount is not about to get any lower as an average student expected to graduate from school has a student loan of about $ 25,000.

When filing for bankruptcy in Arizona, it is impossible to discharge student loans. Any debtor ought to show hardship in repaying the loan and is only allowed to do so if he/she indicates a deliberate effort to pay the loan for a specified period of time or is unable to meet the stated demands due to hard economic conditions that are uncontrollable.

But how do student loans amount to a potential bankruptcy?

If the Congress passes The Fairness for Struggling Students Act, it is possible to change the loans from leading to a bankruptcy. This would permit students who owe private lenders money to clear their student-loan debt when filing for bankruptcy. Private loans have fewer consumer protections than government loans and usually have higher and variable interest rates. Government loans are exempted from this act as their characteristics are loan limits, interest-rate caps, forbearance repayment when faced with economic hardships and have income-based repayment plans.

Senator Dick DurbinD-Ill sponsors the legislation and is the one who convened the hearings about the student-loan issue. Deanne Loonin, a National Consumer Law Center Attorney testifies in a report that the bankruptcy law in operation treats individuals with student loans in a similar manner with people struggling with alimony, child-support debts, criminal fines, and overdue taxes.

Sally Mae, a student loan lender is in support of the legislation that allows discharge from bankruptcy for both private and federal students who have made an effort to repay their loans for a period of about five to seven years and are experiencing financial strains. Other people at the hearing thought that it is unfair for the lending institutions which offered the funds to discharge the borrowers. This in turn, leads to an increase in the cost of student-loans.

If you have a student-loan debt and are struggling, do not hesitate to look with a certified Tucson, Arizona attorney who deals with bankruptcy. The attorneys are experienced in bankruptcy issues and will give you expert advice and help you choose the best bankruptcy option for you.