Illinois Bankruptcy Lawyer Answers: How Does Filing Affect A Student...

School loans or student loans in a bankruptcy case are basically non-dischargeable, meaning they are not eliminated.  There are certain exceptions.  There are certain hardship cases where student loans can be eliminated.  In my practice of nearly 20 years I have hardly seen a case where a student loan could be eliminated. 

The law changed October 17, 2005, but prior to that law change there was a subtle law change that had to do with the dischargeability of student loans.  I believe it was 1997 whereby the student loans became non-dischargeable no matter how long they were in repayment status.  Prior to that change in the law, if you had a student loan that was more than seven years old, in other words, more than seven years in repayment status, then that debt, even though it was a student loan, could be eliminated in a Chapter 7 bankruptcy.  That law changed.  Any kind of loan that is for an educational purpose is non-dischargeable per se.  The exception would be extreme hardship cases. 

Now to prove extreme hardship, you basically have to prove that you do not have the ability to repay that debt, that repaying the debt would cause an extreme hardship to you.  You must have made efforts to repay it before you filed the bankruptcy.  Basically I have not seen a case where I was able to advise a client that a student loan would be dischargeable.  

 In terms of future student loans clients often ask me, “If I file for bankruptcy, will I be able to get a student loan again?”  The answer is yes.  You will be able to get a student loan after you file for bankruptcy protection.  The same standards that go into determining whether or not you qualify for a student loan will apply whether or not you filed for a bankruptcy or not.  It all depends on the lending guidelines and the lending standards and how freely they’re loaning out money for student loans at the time.  Policies do change.  Governmental policies ebb and flow with regard to student loans.  So filing a bankruptcy will not in and of itself prevent you from obtaining a student loan.