Student Loan Discharge In Bankruptcy

As a bankruptcy lawyer I frequently run into a dead end when I try to help people with large student loans . The law says that student loans cannot be discharged in bankruptcy unless the student loan will create an undue hardship, and even though there are countless individuals, who have graduated with degrees that offer them little hope of ever repaying the huge student loans that were necessary to complete their education, bankruptcy courts have been very tough in recognizing that any debtor ever meets this standard.

However, a decision that came down from the Seventh Circuit Court of Appeals in Chicago on April 10, 2013 seems to offer some hope for those needing more reasonable treatment. In the case of Educational Credit Management Corp. v. Krieger the court allowed the discharge of $25,000.00 in student loans for a paralegal in her fifties, who had been making every effort to repay the loan in the eleven years since she has taken out the loans and had no hope of repaying it based on her income.

In doing so the appellate court rejected the concept that the lower court had embraced, that this was not enough for a discharge, unless the debtor could also prove that she had no reasonable prospects of improving her income in the future, a standard that just about anyone would find impossible to meet.