Can Student Loans be Discharged in Bankruptcy?

by | Mar 22, 2023 | Bankruptcy Law |

Can student loans be discharged in Bankruptcy? The answer is sometimes. Different factors come into play such as is the student loan federal or private, is there a hardship, what type of institution the student attended and for what purpose was the money used. All types of student loans are subject to discharge if a hardship can be established. However, it has been extremely difficult to obtain a hardhip discharge. To do so, the debtor must establish they attempted to pay in the past, they are unable to pay at present and they will not be able to ever pay in the future. While the first two prongs are not difficult to establish the third prong has proven to be extremely difficult to establish. Unless someone is permanantly disabled it is difficult to establish that the debtor won’t earn more in the future.

Recently there have been some changes made relating to Federal Student loans. A procedure has been established that allows the US Attorneys representing the Federal Government regarding the Federal Student loans to be more lienent in establishing hardship through a particular set of criteria. If the matter cannot be resolved using this procedure, any litigation would still be subject to the same difficult standards.

Private Student Loans can also be addressed in bankruptcy. For example, if part of the loan is for living expenses, that amount can be discharged. Also, if the school attended is not eligible for Title IV Funding, the college attended is not accredited, the college is in a foreign country and or the loan is for an unaccredited training or trade school, the loan may be dischargeable

A recent New York case allowed the discharge of private student loans but it is not clear whether other courts will follow that ruling. There have also been proposals in Congress to address student loan debt. With the different possibilities of discharging student loans, it would certainly make sense to consult with an experienced bankruptcy attorney about your student loans.



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