Are Student Loans Dischargeable?
The short answer here is no. It is rare for a student loan to be discharged during a bankruptcy. The exception to the rule is if an undue hardship can be proven. This means a person is able to prove that he or she is unable to pay the student loan and will remain unable to pay. One case where this may be approved is if a person becomes disabled and is unable to make a living which supports student loan repayment.
All or Nothing
When considering if a person can repay a student loan, courts will usually either approve the loan for discharge in its entirety or not at all. Being released from only a portion of a student loan does not generally occur.
Another factor besides disability that may weigh in on being considered for undue hardship are poverty that is persistent with no likelihood of change. This often needs to be in combination with a history of good faith payments.
Defenses to Student Loans
In cases where a for-profit school has been fraudulent, unfair, or has had a breach of contract a person may be able to raise a defense to a creditor’s Proof of Claim. If successful, a court will release the individual from any of the student loan repayment. This is not necessarily related to a bankruptcy, but is one way that student loans are sometimes discharged.
Chapter 7 versus Chapter 13
In either chapter 7 or 13 it is rare to get a student loan discharged. The above mentioned cases of undue hardship or raising a defense are the only options. In a chapter 7 personal bankruptcy a student loan will not be effected. In a chapter 13 bankruptcy student loan payments may be lowered or stopped for the duration of the debt repayment period. Once that period has ended the student loan will continue as before.
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