E is for Educational debts

Debts related to education: tuition, student loans, room and board, etc, are generally not dischargeable in Chapter 7 bankruptcy. There is an exception, if the debtor can show that they are an undue hardship to repay. There are two lines of cases, but a debtor would have to show that they would never be able to repay them now, or ever in the future. A catastrophic injury, or other similar tragic occurrence is usually needed to meet this requirement. The one case I’ve seen is a 20 yr old woman who had a stroke and was forced to have her parents care for her for the rest of her life.

Under chapter 13, a debtor can pay down these debts, but the remaining unpaid portion remaining at the end of the bankruptcy, will survive and must be repaid.

Tough rules, but there are rumblings in Congress of possible changes under consideration.

Stay tuned.

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Terrance Leeders

Chicago Bankruptcy Attorney, husband, father, Cubs fan.

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