One type of loan that may be excepted from bankruptcy discharge are qualified education loans.

The first debtor obtained a private loan for tuition and expenses to attend a technical school. The school was not eligible under Title IV of the Higher Education Act. One of the exceptions to discharge in bankruptcy is an educational loan that is a “qualified education loan.” The Court noted that for that exception from discharge to apply the loan must be from an accredited institution eligible to participate under Title IV of the Higher Education Act. Therefore, the debtor’s loan was not a qualified education loan.

Another type of loan that may be excepted from discharge in bankruptcy are an obligation to repay funds for, “an educational benefit, scholarship, or stipend.”

For this type of loan to apply, the Court required a conditional type of school payment, not an unconditional requirement to repay, as in a loan. Hence, the Court held that the debtor’s loan did not qualify under this exception.

A third type of loan that may be excepted from discharge in bankruptcy are student loans or overpayment in which a governmental unit or nonprofit institution is involved in the loan.

These are the more common types of student loans. This did not apply to the debtor’s private loan at a technical school. Therefore, the Court held the private loan was discharged in bankruptcy. Crocker v Navient Solutions (In re Crocker), Case No. 18-20254 (5th Cir. October 21, 2019).

Have your financial situation considered by an experienced bankruptcy attorney and former Trustee for the U.S. Bankruptcy Court. Call or contact LONG & LONG now at 303-832-2655, or www.denverbankruptcylawyer.net.

Until now it has been extremely difficult to get rid of student loans in bankruptcy for most debtors. In most cases the debtor in bankruptcy must prove “undue hardship” on the debtor or the debtor’s dependents in the event the debt is not discharged. Most courts rely on the Brunner test to interpret undue hardship. Under the Brunner test the debtor must prove three prongs. The first prong to prove is that the debtor and the debtor’s dependents cannot maintain a minimal standard of living if the student debt is not discharged. The second prong is to prove that this financial condition is likely to persist for a significant portion of the repayment period. The third and final prong is proving the debtor has made a good faith effort to repay the student loan.

Disabled Veterans Can Get Their Student Loans Discharged By the Federal Government

Without filing bankruptcy, totally and permanently disabled veterans may get their student loans discharged by the federal government. On August 21, 2019 President Trump issued an executive memorandum making it, “the policy of the Federal Government to facilitate…the discharge of Federal student loan debt for totally and permanently disabled veterans.” The Presidential Memorandum can be found the link below:

https://www.whitehouse.gov/presidential-actions/presidential-memorandum-discharging-federal-student-loan-debt-totally-permanently-disabled-veterans/?utm_source=link

Trump Administration Considering Plans to Eliminate Student Debt in Bankruptcy

The Trump administration is currently looking at refinancing loans at lower interest rates, and most importantly, eliminating student debt through bankruptcy. The Wall Street Article can be found at the link below:

https://www.wsj.com/articles/trump-administration-weighs-plans-to-reduce-student-debt-11576713378

So, debtors with student loan debt may finally be getting relief in bankruptcy. Questions? With over 35 yearsof experience and a former Trustee for the U.S. Bankruptcy Court call LONG & LONG now at 303-832-2655, or visit www.denverbankruptcyattorney.net.