Student Loan Discharge Denied: Court Says ‘Not So Fast’!

District Court Denies Debtor Discharge of Student Loans: Appellate Panel Says ‘Not So Fast’!

We’re following a potentially important bankruptcy case in 2013 that may affect the ability of individuals to discharge student loan debts in bankruptcy.
On August 21, 2013, the U.S. Bankruptcy Appellate Panel for the Eighth Circuit (B.A.P.) reversed and remanded a decision of the U.S. Bankruptcy Court for the Eastern District of Missouri which denied a discharge of a debtor’s student loan debt. The B.A.P. found that denying the debtor a discharge of her student loan debts to National Collegiate Trust was an undue hardship on the debtor and remanded the decision to the Bankruptcy Court to look at each individual loan owed to National Collegiate Trust to determine if the debtor could pay any one or more of those loans owed over the course of a year.

The Debtor in this case did not seem to have as extreme of a case as found in the cases of many of the past debtors who have been granted a student loan hardship discharge. The loan amount in question was approximately $70,100.00, not hundreds of thousands of dollars. The Debtor was only 32 years old, so she still had many years left to work and pay on her student loans. The B.A.P. did not even take into consideration the Debtor’s medical conditions when making its determination, because the Debtor did not introduce them into evidence for the B.A.P.’s consideration. National Collegiate Trust filed an appeal of the B.A.P.’s decision on September 24, 2013 with the Eighth Circuit U.S. Court of Appeals. Time will tell if the B.A.P.’s decision is overruled, but it does give debtors plagued by student loan debt hope.

We will continue to monitor this case and others as it relates to student loans and bankruptcy. For more information on student loans and bankruptcy in 2013, see this post on how student loans are typically not dischargeable and this case showing the potential to discharge student loans in bankruptcy.

If you are facing significant financial difficulties from debts, including student loans, you may want to contact one of our experienced bankruptcy attorneys at The Sader Law Firm. We have been helping clients file for bankruptcy in Missouri or Kansas since 1984.