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

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.

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.

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!

Because Congress passed a law that student loans cannot be discharged in bankruptcy.

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.

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!

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.

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.

The federal law provides for them not being discharged.

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."