Student Loan Bankruptcy. Anybody Succeed?

Edwards Finance > Loans

Q. Student Loan Bankruptcy. Anybody Succeed?

A. Even if (as I am sure is so) inadvertently, and even if (as I also do not question) the present poster was able to achieve a bankruptcy discharge of a student loan in default, this -- especially the unqualified "can" and "very easily" part -- is a potentially seriously misleading statement. While it is not uncommon in some places in the country for collectors of such loans to back off if a timely and credibly factually-compelling application for a discharge is made, the actuality remains that "the law" does _not_ "state" what the poster here says. It (the Bankrutpcy Act) provides instead that only preponderently credible proof of "undue hardship" will warrant a discharge of this sort of obligation where, compared with being "disabled" standing alone or compared with "not being able to work again" standing alone, what sort of "hardship" is "undue" remains a fact-specific and, therefore, case-specific issue. If, again, as a _practical_ matter, a well-presented factually-paticularized claim of "undue hardship" might induce a particular collector (in that firm's self-defined and, therefore, self-applied discretion) to acquiesce in effect (though, also sometimes, not formally) in a discharge of a student loan in default (and well-experienced bankruptcy practitioners will confirm that this often does occur), such discharge is not always "easily" (let alone "very easily") obtained if there is a live/well-presented challenge to the application for such a discharge. A fairer statement of the (more or less) generally-prevailing "test" will be whether the debtor seems realistically able probably to prove - that based on current and realistically projected future income and expenses, s/he would not be able to maintain at least a "minimal" standard of living (including, if there are any, for his/her dependents) if s/he were forced to repay the loans, _and_ - that there are additional circumstances which establish that such a state of affairs is likely to persist for at least significant portion of whatever may be the otherwise applicable repayment period, _and_ - that the debtor has made good faith efforts to repay the loans.

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