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?
October 16th, 2009 at 7:04 pm
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…
October 16th, 2009 at 7:04 pm
I don’t think anyone should file bankruptcy except for medical debt because that is often the one type of debt that we don’t have a choice about (it’s often life or death). Student loans are mostly from the government… that’s why they are protected in bankruptcy, just like you can’t get out of IRS debt through bankruptcy either. This is why students should be careful with what they take out, and stop living off their student loans and partying with it… they’re going to regret it later and they just don’t realize it. I agree with you on credit cards… there are some people who honestly should file bankcruptcy and who have learned their lesson and change their lives, but I get so sick of seeing someone file bankruptcy and then they’re back to eating out every night and taking vacations on new credit cards a year later… and some of us haven’t had a vacation in years because we refuse to have credit card debt. Sorry for my rant, but bankruptcy irritates me.
October 16th, 2009 at 11:14 pm
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October 17th, 2009 at 3:46 am
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