Recent Bankruptcy Case Could Show the Way For Ditching Student Loan Debt

Mature Man Satisfied Sitting In Front Of Laptop DaydreamingA current bankruptcy case in Boston could make a significant difference in the way that student loans are treated in bankruptcy. The case could set a precedent for “undue hardship” arguments regarding student loan debt.

As of now, getting student debt discharged is a dubious task requiring that the person filing bankruptcy proves that repayment of the debt causes “undue hardship,” a term that has not been clearly defined by any court and is very often rejected by judges.

A 65-year-old man has requested that several of his student loans be discharged. The Parent Plus loans are backed by the U.S. Dept. of Education and add up to about $246,000. The First Circuit Court of Appeals is seriously considering granting his request.

The Boston native was let go in 2002 from his position as president of a manufacturing company. He stated that his retirement and other savings have been used up in the years since, and now his home is being foreclosed on. The man also claims that even if he were to get a new job that paid $50,000 a year, and made regular on time payments towards his student debt for the next 12 years, the debts still would have doubled by then to $500,000 because of interest.

The man is asking that “undue hardship” be more clearly defined. Even if he does not win his case, having a clear definition of what qualifies as undue hardship with regard to student loans “could have a really significant impact on other courts, which have not looked at this issue in a long time” says an attorney for the National Consumer Law Center who provided support for the debtor in this case.

The amount of student loan debt in the U.S. is more than $1.2 trillion, making it the second highest source of debt behind mortgages. The Department of Education lists 7.5 million of those debtors as being severely behind on payments.

Garland & Mason, L.L.C. – New Jersey bankruptcy lawyers


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