Encouraging the Movement Towards Greater Flexibility in Discharging Student Loan Debt Through Bankruptcy

Student-past-due-300Student loans are almost impossible to discharge in bankruptcy.  Argyle’s Bankruptcy Issues Handbook discusses the current state of the law, which is summarized in this blog post.  In short, there is a “hardship” exception, but Courts really only discharge student loans where there is a significant and unexpected disability.  This is a problem in today’s economy, where some students incurred hundreds of thousands of dollars of debt with bleak job prospects.  These students may be dealing with student debt literally their entire lifetimes.  In today’s economy where private schools are so expensive, the prohibition against discharging student loans is a bit anachronistic.  But there seems to be some movement towards discussing greater flexibility in discharging student loans.  For example, in a recent opinion, the 7th Circuit meaningfully addressed the problem with student loans.  Argyle will keep you posted in future blog posts.  Also, JD Supra discusses the growing movement to make student loan debt more dischargeable:

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