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Student Loans

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Student Loans – Impact

What happens next?


  • Approximately $1.5 trillion owed as of June 2019
  • Far exceeds auto loans and credit card debts
  • Currently non-dischargeable
  • Been increasing $70 billion to $100 billion per year since 2006
  • Bureau of census indicates about 17.6% of American adults have student loans

Pending in Congress:

  • May 9, 2019, the Student Borrower Bankruptcy Relief Act of 2019 introduced House of Representatives #2648 and in Senate #1414.
  • Both of the above would make all student loan debt dischargeable in bankruptcy
  • Senate Bill referred to Committee on Judiciary
  • House Bill referred to Subcommittee on Antitrust, Commercial and Administrative Law

Many of my clients have large amounts of student loan debt.   If this Bill becomes law, it would help my clients tremendously.   Let’s continue to watch and see what happens next.

Student Loan Debt – Hopes for Discharge in Bankruptcy


  • Prior to 1976, federal and private student loan debt were both dischargeable when individuals filed for bankruptcy.
  • In 1998, federal student loans were made nondischargeable without a very restrictive “hardship”.   We all know that this is not the case since then with the new restrictions that were put in place. (put link to previous article.

Current Update:

May 9, 2019 a new bill was introduced “The Student Borrower Relief Action of 2019” which would eliminate the bankruptcy code which makes private and federal student loans nondischargeable and treated as any other consumer debt in bankruptcy.

Let’s follow this bill and hope there will be relief for the 44 million Americans who owe $1.5 trillion in student debt.


Court States Debtor Underemployed Due to Self-Imposed Restrictions.

August 8, 2018

Background as to Debtor:

  • Enrolled in Southern Illinois University from 1982 – 1985 but did not graduate
  • Completed his undergraduate studies at Arizona State University and earned a bachelor’s degree in mathematics and statistics in 1989.
  • Obtained a Master of Business Administration from University of Texas in 1995.
  • In 2010 the debtor received a Master of Art in Communications from Governor’s State University.
  • Education was 100% financed.
  • Only paid back $140 of his student loan debts and was on a zero-pay plan due to his low wages.
  • Filed for Chapter 7 Bankruptcy in November 2015
  • Only worked at a flower shop during the Spring, lived with his Aunt and only contributed to household expenses.
  • Was 52 years old and after paying expenses had discretionary income.
  • Petitioned the Court that his Student Loan debt should be discharged as part of his bankruptcy.
  • Claimed he had a learning disability which affected his speech and suffered anxiety.

read more…

Student Loan Debt Received Priority Treatment – Chapter 13

March 27, 2017


  • A Chapter 13 Plan proposed to pay student loan debt ahead of other general unsecured creditors.
  • Trustee objected to the payment priority proposal with the premise that the student loans were being given favored treatment of student loans and was unfair discrimination.
  • Debtor proposed to pay nearly $5,000 per month through the plan and treated two student loan claims which totaled $65,000 with a separate class.

read more…

Discharging of Student Loans – Brunner Test: Undue Hardship

October 30, 2016

Student Loan CapSuccessfully getting student loans discharged in a Chapter 7 bankruptcy case is very difficult. For the most part, you must show that repayment would cause you “undue hardship.”   Most courts us a 3-factor test, called the Brunner test, to determine if you can meet the undue hardship requirement for student loan discharge.

What is the Brunner Test?

There are 3 factors or prongs that must be met: read more…

Student Loan Debt Discharged in Bankruptcy for 63-year old

Student Loans
October 23, 2016

As I have discussed in the past, student loan debt forgiveness (discharge) in Bankruptcy is taken on a case by case basis.


  • 63 year old Chapter 7 Debtor was a cancer survivor.
  • $43,253 in Student Loans
  • U.S. Department of Education advised her to take advantage of the income-based repayment options to her (ICRP Program).
  • Debtor had been unemployed but was now looking for work.
  • Owned car and home but both needed significant repairs.
  • Debtor had not purchased new clothes in almost a year, did not have health insurance and had not purchased a significant appliance in over 10 years.
  • Debtor lived frugally.

read more…

Debtor Tried to Discharge Student Loans – Court Denied; Debtor Ordered to Pay Attorney Fees

Student Loans
September 11, 2016

Discharging of student loans in general is taken on a case by case basis.  That being said, it is extremely difficult to discharge student loans.   Here is a case that when the Debtor lost in Bankruptcy Court, the Debtor even had to pay the Attorney Fees to the Defendant of $11,130.


  • Debtor borrowed $149,197.00 to fund his education at St. George University School of Vet. Medicine in Granada.
  • Debtor asserted that the loans were made by a for-profit entity (non-gov. unit or nonprofit).
  • Debtor asserted  loans were not “qualified educ. loans”.

read more…


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