Are Student Loans Dischargeable Through Bankruptcy?

Posted by Wesley Scott on May 9, 2019 at 9:00 AM
Wesley Scott

bankruptcy_and_student_loans_2-2In general, student loan debt is not dischargeable in bankruptcy. The Bankruptcy Code prohibits the discharge of student loans in almost every instance. This boggles the mind given how burdensome student loan debt is to so many Americans, but student loans are not currently covered in bankruptcy.

Anxious debtors, however, may swear they heard student loans can be erased in bankruptcy. It is true that in extremely rare circumstances student loan debt can be discharged, but this is so rare and difficult there is no point in even dreaming about it; student loans can only ever be discharged if the debtor sues the lender and gets a bankruptcy judge to agree that paying a student loan causes undue hardship.

On its face, tens of thousands (or even hundreds of thousands) of dollars obviously constitutes an undue hardship, but bankruptcy courts rarely see it that way. Plus, this method requires litigation, meaning the debtor would have to pay lawyers to bring the case. Depending on the fee agreement, the debtor could pay attorney’s fees even if he or she wins against the lender. This is a lot of risk for a practically nonexistent chance of reward.

So what is a debtor drowning in student loans to do? Bankruptcy will not clear student loan debt, but it can help with debts from other sources. A Chapter 7 bankruptcy can forgive credit card debt, for instance. Or a Chapter 13 bankruptcy can help a debtor repay debts from medical bills (or a portion of them) over time. Many other types of debt are dischargeable, so bankruptcy can help with those other debts while the debtor diligently makes student loan payments. Bankruptcy may be able to ameliorate other parts of the debtor’s financial situation, apart from student loans. 

If you are contemplating bankruptcy, reach out to Minnesota’s NICEST bankruptcy law firm at www.kainscott.com.  You will be so happy you did!

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