House Hearing To Consider Discharging Student Loan Debts in Bankruptcy

The U.S. House of Representatives will hear some arguments Tomorrow — Wednesday, September 23rd — at as to whether student loans should be discharged through bankruptcy.

The House Subcommittee on Commercial and Administrative Law will hold a hearing entitled “An Undue Hardship? Discharging Educational Debt in Bankruptcy.”

Currently students loans cannot be discharged through bankruptcy absent  of showing “undue hardship“.

(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—
(A)
(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or
(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual;

Earlier this year, the Eighth Circuit didn’t allow a law grad, who racked up $350,000 in educational debts and penalties, to discharge his debts in bankruptcy.

To succeed, a borrower must show “undue hardship” — a step beyond what it takes to discharge most other kinds of debt. The high standard is meant to encourage lenders to extend students credit and to prevent abuse.

…The ruling stated that Jesperson should have taken advantage of a program that would have allowed him to make payments based on his income and family’s poverty level — regardless of his total unpaid student debt. Lenders argued that if Jesperson had used the program, his loan payments would have equaled no more than $629 per month.

If, after 25 years, he had not repaid the debt, the unpaid portion would be forgiven.

Jesperson isn’t working as a lawyer, according to Above the Law. He’s a painter who lives in a trailer and will find it virtually impossible for him to pay off  $350,000 unless he makes a change.

unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—

(A)

(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or

(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or

(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual;

Related posts:

1. Catholic Church Facing Sex-Abuse Claims Files Bankruptcy
2. Texas Lawyer Loses License Because of Failure to Pay Debts
3. House Votes to Impeach U.S. District Judge
4. New Law Graduates Are Finding It Tough.
5. Harvard Law School Sells Naming Rights For Cash

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