Why are student loans exempt from bankruptcy protection?
Why can someone live the high life on credit cards and walk away? Why do people get to stay in McMansions they can’t afford? What is special about student loan debt that those who have difficulty in payment are stuck for life?
Student loans are no longer dischargeable in any chapter of bankruptcy unless you can prove that repaying the loan creates an undue hardship on you or your family. Prior law allowed their discharge once they had been in pay status for 7 years. The law changed in the fall of 1998.
Proving hardship usually requires showing that you can’t provide a minimum standard of living for yourself and your dependents if you have to repay the loan. Some courts will discharge part of the loan on a showing that repaying it all would be a hardship.
Student loans are sometimes unenforceable due to school closures, fraud, etc. Chapter 13 can provide a way to cure defaults on student loans, or to pay them off over the course of the plan.
Bye…
