Judge Discharges Student Loan Debt

The common wisdom is that is nearly impossible to discharge a student loan in a Chapter 7 bankruptcy. I recently saw a Florida bankruptcy case where a  bankruptcy judge did order the discharge of a debtor’s student loan.

The court noted that the debtor’s disposable income based upon her bankruptcy schedules was only $200 per month, while her student loan payments would be over $1,100. Repayment was financially impossible. The court said the debtor is not required to live in poverty in order to repay the loan. The court also noted that the debtor was elderly and would likely only work for a few more years. Her limited employment prospects made it likely that the debtor would never be able to fully repay the student loan. The court noted the debtor’s good faith efforts to repay part of the loan as evidenced by her using $12,000 of exempt retirement assets to make past payments.

Discharge of student loans is difficult, but it is not impossible. If your situation is as financially difficult as the debtor in this case you should discuss with your bankruptcy attorney the filing of an adversary complaint for student loan relief.

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