Well, This is Going to be a Lousy Situation

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Student loans and bankruptcy:

Student loans are difficult, but not impossible, to discharge in bankruptcy. To do so, you must show that payment of the debt “will impose an undue hardship on you and your dependents.”

UNDUE HARDSHIP EXAMPLES

It is up to the court to decide whether you meet the “undue hardship” standard. Here are a few examples of successful and unsuccessful cases.

1.A 58 year old I.R.S. employee making about $38,000/year was able to get his loans discharged. He had taken out the loans to attend a chiropractic program which he never completed. His overall expenses were about equal to his income. He was able to show that it was unlikely that his income would increase until his planned retirement at age 65. He was single with no dependents and had health problems. The court found that he had acted in good faith even though he had never made any voluntary student loan payments.
2.A college-educated married couple proved undue hardship and were able to discharge their loans. They both worked, but had income barely above poverty level. The court noted that the borrowers worked in worthwhile, although low-paying careers. One worked as a teacher’s aide and the other as a teacher working with emotionally disturbed children. Even with a very frugal budget, they had $400 more a month in expenses than income. Their expenses included $100 monthly tuition to send their daughter to private school. Relatives paid for most of this and the couple testified that they objected to the public school’s corporeal punishment policy. In agreeing to discharge the loans, the court also found that the couple had acted in good faith because they asked about the possibility of a more affordable repayment plan. Not all courts are as sympathetic to borrowers who work in low-paying careers. For example, one borrower was denied a discharge because he worked as a cellist for an orchestra and taught music part-time. The court suggested that this borrower could find higher-paying work. Another court came up with the same result for a pastor. The court found that it was the borrower’s choice to work as a pastor for a start-up church rather than try to find a higher paying job.
3.A number of courts have granted discharges in cases where the borrower did not benefit from the education or went to a fraudulent school.
4.There have been mixed results when borrowers have tried to show that their financial difficulties will persist into the future. For example, one court found that a borrower’s alcoholism was not an insurmountable problem, but some borrowers have won these cases. In one case, a borrower’s testimony about her mental impairment, including evidence that she received Social Security benefits, was enough to convince the court of undue hardship. The court agreed with the borrower that her ongoing mental illness was likely to continue to interfere with her ability to work.

Article here for more info:

http://www.studentloanborrowerassist...rg/bankruptcy/