Why can't student loans be part of bankruptcy? 30 Answers as of June 21, 2011

Why can't student loans be part of bankruptcy?

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The Law Office of Mark J. Markus
The Law Office of Mark J. Markus | Mark Markus
Student loans are a "part" of a bankruptcy case if they are owed on the date the case is filed. I believe the question you're asking is why are they not DISCHARGEABLE in a bankruptcy case. The answer to that is because Congress says so. The more specific answer is 11 U.S.C. 523(a)(8). Student loans can be discharged under rare circumstances if you can prove, after trial, "undue hardship" as that term is defined by the courts in your jurisdiction.
Answer Applies to: California
Replied: 6/21/2011
Law Offices of Dennis Baranowski
Law Offices of Dennis Baranowski | Dennis Baranowski
The Bankruptcy Code specifically excepts certain types of student loans, including federal student loans, from the bankruptcy discharge. A meeting with an experienced bankruptcy attorney will help you determine whether or not your specific student loan fails within the exceptions from the discharge.
Answer Applies to: California
Replied: 6/21/2011
Rosenberg & Press
Rosenberg & Press | Max L. Rosenberg
Student loans are among the few unsecured debts that are generally not dischargeable in bankruptcy. Student loans can only be discharged if the debtor can show that payment of the loan will impose an undue hardship on the debtor and dependents. Courts have interpreted this standard very restrictively. The Department of Health, Education and Welfare initiated the movement to make student loans non-dischargeable in the 1970s by reporting to the 1973 Congressional Commission on Bankruptcy Laws of the high default rates and a negative public image that could discredit the newly created student loan program. Congress codified the Commissions recommendations in the Education Amendments of 1976. Another argument used is that those with a college degree have an asset which should deny them access to bankruptcy relief for loans used to finance that degree. Argument 2: Student loans are easier to get than most other credit and should not be dischargeable. Argument 3: Significant safeguards exist in the student loan programs as substitutes for bankruptcy protection. While I agree this is not a fair solution to government concerns and that it curtails the rights of a consumer, this is the current status quo. Remember there is still the possibility of discharge, however the bar is set very high to prove "undue hardship". For more information, please feel free to contact our offices. Thanks for tuning in!
Answer Applies to: Connecticut
Replied: 6/20/2011
Breckenridge and Walton
Breckenridge and Walton | Alan D. Walton
Because Congress passed a law that student loans cannot be discharged in bankruptcy.
Answer Applies to: Michigan
Replied: 6/20/2011
Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
Congress writes the rules. There is discussion of changing those rules but it hasn't happened yet. Unfortunately, the student loan debt is a mess people are stuck with.
Answer Applies to: California
Replied: 6/20/2011
    Law Office of J. Thomas Black, P.C.
    Law Office of J. Thomas Black, P.C. | J. Thomas Black
    Student loans are generally non-dischargeable in bankruptcy, unless you can prove "undue hardship." Undue hardship is much more than ordinary hardship, and most people don't qualify for an undue hardship discharge of their student loans. There is a 3 part test. To have your student loans discharged, you must prove in court that (1) you are unable to maintain even a minimal standard of living, if forced to repay your student loans; (2) this situation is going to continue for most or all of the repayment period of the loans; and (3) you have made a good faith effort to repay the student loans (i.e. usually you have to show that you have paid on the loans). Not only that, but if you would qualify for an "Income Contingent Repayment" plan with the student loan lender some courts are not allowing undue hardship discharges in bankruptcy because you have that other option, to get on some sort of repayment plan with the lender. Why are student loans not dischargeable? That is a policy decision for the U.S. Congress. Want to try to change it? Good luck with that, but if you want to do something, write your Congressman!
    Answer Applies to: Texas
    Replied: 6/20/2011
    Daniel Hoarfrost, Attorney at Law
    Daniel Hoarfrost, Attorney at Law | Daniel Hoarfrost
    All of your debts are part of the bankruptcy.The laws, however, make student loans non-dischargeable, unless you can make a case for extreme hardship.
    Answer Applies to: Oregon
    Replied: 6/20/2011
    Indianapolis Bankruptcy Law Office of Eric C. Lewis
    Indianapolis Bankruptcy Law Office of Eric C. Lewis | Eric Lewis
    Student loans are specifically exempt from bankruptcy discharge under the revised bankruptcy code. If you don't like it and don't think that is fair - like I think - then you should petition Congress to change the law.
    Answer Applies to: Indiana
    Replied: 6/20/2011
    CONSUMER PROTECTION ASSISTANCE COALITION, INC. (DE).
    CONSUMER PROTECTION ASSISTANCE COALITION, INC. (DE). | Gary Lee Lane
    The federal law provides for them not being discharged.
    Answer Applies to: California
    Replied: 6/20/2011
    Law Office of David P. Farrell
    Law Office of David P. Farrell | David Farrell
    With limited exception, student loans are specifically excepted from discharge under 11 U.S.C. 523(a)(8). As a matter of public policy Congress has decided it wants lenders to keep making educational loans without fear that once the borrower graduates they will file bankruptcy and discharge the debt. There is a narrow exception to the rule that student loans are nondischargeable which gives the court power to discharge all or a portion of the debt if repayment would create an "undue hardship."
    Answer Applies to: California
    Replied: 6/20/2011
    The Law Offices of Alan M. Laskin
    The Law Offices of Alan M. Laskin | Jared B. Gaynor
    The simplest answer - because Congress says so.
    Answer Applies to: California
    Replied: 6/20/2011
    Law Office of Asaph Abrams
    Law Office of Asaph Abrams | Asaph Abrams
    Otherwise, every fresh grad perfectly-eligible to file on account of zero assets and zero income would drive straight from graduation to her friendly-neighborhood bankruptcy attorney; debt would be gone by the time the mortar board fell back to earth.
    Answer Applies to: California
    Replied: 6/20/2011
    Law Office of Lynnmarie A. Johnson
    Law Office of Lynnmarie A. Johnson | Lynnmarie Johnson
    Because they have very good lobbyist and they were able to get Congress to make them nondischargeable with very, very few exceptions!
    Answer Applies to: Michigan
    Replied: 6/20/2011
    Lakelaw - Loop Bankruptcy
    Lakelaw - Loop Bankruptcy | David Leibowitz
    Because Congress said so. The reason is that student loans would be less available if they could be eliminated in bankruptcy.
    Answer Applies to: Illinois
    Replied: 6/17/2011
    Bankruptcy Law Office of Robert Weed
    Bankruptcy Law Office of Robert Weed | Robert Weed
    Congress said so.
    Answer Applies to: Virginia
    Replied: 6/17/2011
    Financial Relief Law Center
    Financial Relief Law Center | Mark Alonso
    Student loans are protected and cannot be part of a bankruptcy. The fear is, less lenders would offer student loans if they were discharged which would make it tougher to find ways to borrow money for college.
    Answer Applies to: California
    Replied: 6/17/2011
    Law Offices of Joseph A. Mannis
    Law Offices of Joseph A. Mannis | Todd Mannis
    You should probably direct this question to your Senator or Congressman...
    Answer Applies to: California
    Replied: 6/17/2011
    Bird & VanDyke, Inc.
    Bird & VanDyke, Inc. | David VanDyke
    Student loans are not dischargeable in bankruptcy because that's the law. Probably because they are government guaranteed and the government makes the rules.
    Answer Applies to: California
    Replied: 6/17/2011
    Symmes Law Group, PLLC
    Symmes Law Group, PLLC | Richard James Symmes
    Student loans are not allowed to be discharged in bankruptcy because the bankruptcy code does not allow it unless a debtor has some kind of medical condition that prevents them from earning a living and paying back their loans.
    Answer Applies to: Washington
    Replied: 6/17/2011
    The Law Office of Brian Nomi
    The Law Office of Brian Nomi | Brian H. Nomi
    Because that's the law. It's not fair for a company to give out a student loan, so the student can get a high paying job, only to have that loan discharged in a BK. For further information, it's best to consult with an experienced attorney. Any good attorney will give you a free initial consultation.
    Answer Applies to: California
    Replied: 6/17/2011
    Ursula G. Barrios Law
    Ursula G. Barrios Law | Guillermo Machado
    Congress.
    Answer Applies to: California
    Replied: 6/17/2011
    Law Office of L. Paul Zahn
    Law Office of L. Paul Zahn | Paul Zahn
    Because the bankruptcy code says they are not dischargeable.
    Answer Applies to: California
    Replied: 6/17/2011
    Law Office of Maureen O' Malley
    Law Office of Maureen O' Malley | Maureen O'Malley
    Do you mean why can't they be discharged? Because Congress was protecting debts owed to the government.
    Answer Applies to: Virginia
    Replied: 6/17/2011
    Jackson White, PC
    Jackson White, PC | Spencer Hale
    Because congress decided to generally exclude them from the discharge in bankruptcy. Student loans can be discharged however in the event of "undue hardship.".
    Answer Applies to: Arizona
    Replied: 6/17/2011
    Carballo Law Offices
    Carballo Law Offices | Tony E. Carballo
    That is good question for your Congressman. Your question is a policy question and not a legal question. Congress decided that you must pay if you borrow to get an education since you presumably benefit from it. Part of the reason may be also that the federal government guarantees such loans so if you don't pay the rest of us pay more taxes to cover the loss. (However, I can point out that you can discharge back taxes (more than three years old) so why not student loans unpaid for a long time?) Another reason, perhaps, is that there are many programs to allow you to repay the student loans over many years or defer payment for a long time and you must go through all those opportunities before having a chance to discharge student loans in bankruptcy. Yes, you can discharge student loans but it is not easy to do.
    Answer Applies to: California
    Replied: 6/17/2011
    Bankruptcy Law office of Bill Rubendall
    Bankruptcy Law office of Bill Rubendall | William M. Rubendall
    Congress enacted the provision excepting student loans from discharge except in rare instance where extreme hardship can be proved in an adversary proceeding (lawsuit) filed during the bankruptcy.
    Answer Applies to: California
    Replied: 6/17/2011
    The Schreiber Law Firm
    The Schreiber Law Firm | Jeffrey D. Schreiber
    They are part of the bankruptcy as they must be listed as a creditor, but by law student loans are not dischargeable in a bankruptcy unless you prove it is a hardship. The hardship must be to the point that you prove the choice is either you pay the rent or your student loan payment.
    Answer Applies to: California
    Replied: 6/17/2011
    Ashman Law Office
    Ashman Law Office | Glen Edward Ashman
    Because Congress, which passes the laws, said you cannot discharge them. (Your question is misworded. Student loans ARE part of a case and they ARE affected by a case. You just don't normally get to discharge them).
    Answer Applies to: Georgia
    Replied: 6/17/2011
    Benson Law Firm
    Benson Law Firm | David Benson
    They are includable, but may not be dischargeable.
    Answer Applies to: Ohio
    Replied: 6/17/2011
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