Protecting Your Rights And Your Future

Some debtors can get a student loan discharge in bankruptcy

| Oct 11, 2015 | Personal Bankruptcy

There is a popular fallacy regarding the possibility of discharging a student loan in bankruptcy. It is generally thought that it is impossible or nearly impossible to discharge student debt. However, an academic research study published in the American Bankruptcy Law Journal in 2012 found that, in reality, nearly 40 percent of those who try to discharge student loans actually succeed. In Arkansas and nationwide, it may be the right time for those with oppressive student loan debt to consult a seasoned consumer bankruptcy attorney in order to evaluate their prospects for discharge of that debt.

Additionally, many bankruptcy experts support the idea of making it easier to obtain a student loan discharge. Interest in easing the standards has also been expressed and partially implemented in governmental quarters recently. However, what is most intriguing is the reality that a reasonably high percentage of those who request a student loan discharge are successful in getting their request approved by a bankruptcy judge.

Procedurally, a debtor must evaluate the favorable and unfavorable discharge factors with a consumer bankruptcy attorney. If the signs are reasonably positive, an adversarial complaint must be filed in the Bankruptcy Court. That is the equivalent of asking the bankruptcy judge to order discharge of the student loan. The rules and demands with respect to expediting and resolving such claims are more flexible than in a regular civil litigation case.

In Arkansas and other jurisdictions, an adversary case can be resolved relatively quickly, and within the normal duration of the underlying bankruptcy proceeding. There is usually an additional legal fee for a contested matter, but where the outcome is successful, the economic benefits to the debtor could be exponentially beneficial. Additionally, some experts propose to ease the financial burden of a bankruptcy discharge on student loan lenders by making educational institutions partly responsible financially for the loss. It is proposed that the schools would then be more careful in allowing certain students to pursue probable career dead ends under their particular circumstances.

Source:, “Should grads be allowed to declare bankruptcy on student loans?”, Eric Shulzke, Oct. 10, 2015