June 24, 2019

Bankruptcy and Undue Hardship Repaying Student Loans

Under the current bankruptcy law, student loans are not dischargeable in a bankruptcy. Whenever I say this I’m always asked about cases of “undue hardship.”

Experience has taught me that if the debtor is blind, deaf, mute, and is missing all four limbs, there is a small chance that the debtor can show undue hardship and thus have his or her student loans discharged in bankruptcy.

In other words, undue hardship just doesn’t happen. I’m sorry, it doesn’t.

Q: What about all the exemptions  that exist at the federal and state levels— can’t I use exemptions to keep the feds from liquidating my assets to try and collect on student loan debt?

A: GOOD QUESTION and the answer is NO! The feds don’t have to abide by the exemptions, as to student loan default and certain other debts. Check out this helpful set of FAQs from the Federal Student Aid Collections site, which includes these on financial hardship caused by:

If you have student debt in addition to other debts you struggle to pay, a debt counseling session with a qualified bankruptcy practitioner will give you clarity for how to proceed with satisfying your obligations.