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Update on Bankruptcy and Student Loans

The general perspective on student loans and bankruptcy is that student loans are not dischargeable under the bankruptcy code. Previous to 1976, student loans were dischargeable in a bankruptcy and there are still some attorneys that advertise that they were able to discharge student loans in bankruptcy. For now, the reality is that student loans are extremely difficult to get discharged in bankruptcy. This is why it is especially important for you to work with an attorney who has extensive experience with bankruptcy code and with the bankruptcy court you are working with. If you look at the bankruptcy code and translate it loosely, it is possible to interpret student loan debt as a debt that can be discharged in a bankruptcy because the code generally states that anyone in hardship should be able to discharge a student loan, but, in real practice, an experienced bankruptcy attorney would know that this hardship has been defined very strictly and, in turn, has made educational loans nearly impossible to discharge in a bankruptcy. In our research, it has been found that the only times student loans have been discharged in bankruptcy is if it can be proven that you do not have the ability to work in order to pay off the debt. It usually means that you have some sort of disability that does not allow you to hold any type of employment at all.

The good news is that this is a very hot topic in Washington today. There is legislation under review to try to make student loan debt dischargeable under bankruptcy. Bankruptcy Law Pros is keeping up on all of the latest news regarding student loan issues. Keep checking back with us and we will definitely report here if we find any new information on the discharegeability of student loans in the future.

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