Typically student loans are going to be non-dischargeable. A non-dischargeable debt is a debt that is not going to be eliminated in a bankruptcy case. Student loans are the type of debt that are typically non-dischargeable except for extreme hardship cases. In my 21 years of practice, I have never had an extreme hardship case that was winnable before the court. I did have a case where someone was schizophrenic and did not have the ability to work. However, we could not prove that the schizophrenia occurred after the bankruptcy case was filed. The threshold is very difficult and the burden is very difficult as well.
The federal government and the private student loan carriers are going to defend these adversarial complaints to try to discharge student loans under a hardship. They are going to make you prove your case that your client does not have the ability and will never have the ability to repay a student loan. In circumstances where someone really doesn’t have the ability to repay the student loan, they are usually collection proof. So even if the student loan is hanging out there, there’s no way they are going to be forced to repay it because they simply don’t have income, assets or the ability in the future to pay it back.
So student loans are not a debt that’s going to be eliminated in a bankruptcy except in extreme hardship cases. However, if you have a client who simply is disabled or doesn’t have the ability to pay, or their income is exempt such as Social Security, then you don’t have to worry about them owing or being collected upon for the student loan. Contact your attorney to determine whether or not you have a case where a student loan could be discharged for extreme hardship.
