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Paralegal Receives Discharge of Student Loans in Bankruptcy April 10, 2013 Upheld by 7th Circuit

Court Discharges Paralegal’s Student Loans in BankruptcyBook Pages Small

A Chicago area paralegal recently received a discharge of student loans in bankruptcy.  In a recent opinion issued Wednesday, April 10th, the 7th Circuit who made reasonable efforts to repay her student loans was entitled to discharge the remaining $25,000.  The 7th Circuit Court of Appeals said the bankruptcy court had the discretion to decide whether requiring her to repay the student loan would be an undue hardship.

In the 7th Circuit, “Undue Hardship” requires the following:

  1. (1) that the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for [himself] and [his] dependents if forced to repay the loans;
  2. (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and
  3. (3) that the debtor has made good faith efforts to repay the loans.

The Court upheld the Bankruptcy Court’s discharge of the student loans based on, inter alia, that the debtor was living with her mother, age 75, in a rural community where few jobs are available; mother and daughter between them have only a few hundred dollars (from governmental programs) every month. She is too poor to move in search of better employment prospects elsewhere, and her car, which is more than a decade old, needs repairs. She lacks Internet access, which coupled with the lack of transportation hampers a search for work.

via 7th Circuit OKs $25K student-loan discharge for \’destitute\’ paralegal – ABA Journal.

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