Individuals filing for Chapter 7 bankruptcy may face many challenges when trying to discharge their private student loan debt. Often they must continue paying this debt even after they filed for bankruptcy. Now, a new court ruling may change things. What does this mean for bankruptcy and student loans?
Is My Student Loan Debt Dischargable in Chapter 7 Bankruptcy?
The U.S. Court of Appeals for the Second Circuit ruled in favor of a student loan borrower who filed for bankruptcy, including his private student loan debt. Plaintiff, Hilal K. Homaiden, borrowed money from Sallie Mae to pay for college. He then wanted to discharge this debt when he filed for bankruptcy years later. Navient Solutions LLC, the lender who took over his debt from Sallie Mae, argued that the loan was an “educational benefit”. They held that this made it an educational loan, which made it exempt from discharge.
The court ultimately ruled that the plaintiff did not have to re-pay these private loans and that he could discharge this debt with his bankruptcy. The decision stated that the language “educational benefit” is an unconventional way to discuss loans.
The 5th and 10th U.S. Circuit Courts of Appeals also issued similar rulings on private student loan debt in the past.
What Does This Mean For Your Bankruptcy and Student Loan Debt?
If you are having financial troubles and have to file for Chapter 7 bankruptcy, this case makes it easier to discharge your private student loans. However, this ruling does not apply to government-backed loans.
Contact Our Kansas City Bankruptcy Lawyers for Debt Relief Options
Discharging student debt may provide needed relief for individuals who file for Chapter 7 bankruptcy because they cannot meet their debt obligations. An experienced Kansas City bankruptcy attorney can help guide you through this process. We can also help you retain certain assets through the exemption process. You have more financial options than your realize, and we can help you pursue them.
The Kansas City bankruptcy lawyers at Troppito Miller Griffin, LLC can help you review student loan debt relief options. You can schedule a free consultation with us by dialing (816) 320-6527 or by using the case review form on our site.