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Ruling includes woman’s student loans in her bankruptcy

On Behalf of | Sep 9, 2020 | Bankruptcy |

Chapter 7 remains the most popular form of personal bankruptcy due to the benefit that it offers of having certain debts discharged. However, federal lawmakers do not want to see debtors abuse this benefit, and thus place strict qualifications in its eligibility. There are also restrictions as to the types of debts one can resolve through bankruptcy.

When one thinks of debt, they often assume it to be consumer debt. Yet medical debt, a civil judgment or any other type of specialized debt obligation can contribute to a person’s financial struggles. Student loan debt certainly falls into the category of “specialized debt”; the laws regarding its discharge in a bankruptcy case can therefore be quite complex.

Court upholds ruling to discharge student loan debt

A recent circuit court rulings reaffirms this point. According to Forbes Magazine, a woman sought to reopen her bankruptcy case after her student loan servicer (a private company) imposed tens of thousands of dollars in interest on top of her payments after her initial bankruptcy discharge date. She claimed that this placed her in a more precarious financial position than she was in prior to her bankruptcy, and thus sought to have her student loans included in her bankruptcy.

Typically, one needs to show that repaying a student loan would impose an undue financial hardship on them in order to have such debt included in a bankruptcy. However, in its ruling, the circuit court affirmed the lower courts decision that such a standard did not apply in this case due to the fact that the money loaned to the woman was not solely meant to cover her cost of attendance.

Navigating the complexities of personal bankruptcy

As this case demonstrate, a personal bankruptcy case can be quite complex. Reliable legal assistance may help make the swift resolution of such a matter much more of a reasonable possibility.