Wednesday, November 11, 2009

Student Loans Discharged or Eliminated by Filing Bankruptcy

I am frequently asked if student loan debt is dischargeable in bankruptcy. Many non-bankruptcy lawyers believe that the bankruptcy laws had been changed so that student loan is no longer dischargeable by filing bankruptcy. That is not true. Although Congress may have made it more difficult to eliminate student loan debt, discharging student loan debt in bankruptcy is not impossible.

I read a very interesting opinion that was rendered by a Minnesota bankruptcy judge that discharged over $310,000 of student loan debt from a person who had completed college, medical school, and graduate school... and was healthy... and married... to a husband who made over $67,000 annually!!!!

So, there is hope for other people who owe student loan debt and cannot afford to repay it. Please contact me to discuss this case and other issues relating to the elimination of student loan debt or see my website at . Below is a summary of the case to which I referred.

In re Walker v. Sallie Mae Servicing, 406 B.R. 840 (Bankr. D. Minn. 2009). Debtor discharged over $310,000 of student loan debt that she incurred while earning a bachelor’s degree at the University of Illinois, a medical degree at University of Illinois College of Medicine, and a master’s degree at Governors State University. Debtor was healthy and able to work, but stayed home to rear five children. Debtor’s husband held a full-time job as a policeman and a part-time job as a security officer. Debtor’s approximate household income was $67,000 annually.

In addition, within a year of filing the adversary proceeding to discharge the student loan debt, debtor’s spouse purchased a $40,000 new vehicle by incurring a vehicle loan with a monthly payment obligation of $850. Plus, debtor’s spouse signed a $50,000 second mortgage to build a 22-foot deck off their home with a monthly payment obligation of $372.

Nevertheless, the bankruptcy court rejected the objections to discharge argued by the student loan creditors, finding that debtor had provided sufficient evidence that the repayment of the student loan debt would have been an “undue hardship” on debtor and debtor’s dependents. The Walker Court applied the 8th Circuit’s “totality-of-the-circumstances” test. The court made note that the health of debtor’s twin approximately 9-year old sons was a major factor in its decision. The twins suffered with a form of child autism and were receiving intensive therapy offered by the state government for children with autism.

Surprising, the court allowed the discharge finding that the debtor had overcome debtor’s burden of proving “undue hardship” without calling an expert witnesses for an opinion as to the sons’ status and prognosis from the perspective of medicine/psychology or education. Nevertheless, the $310,000 student loan debt was discharged.

Warmest Regards,

Bob Schaller

Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.

Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.

I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.

For information about Chapter 7 bankruptcy Click Here

For information about Chapter 13 bankruptcy Click Here

You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at learn about how the bankruptcy laws can help you.

NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.

I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.

No comments:

Post a Comment