One thing that Bankruptcy lawyers generally agree on is that it is very difficult to get a discharge of student loans and other educational obligations under the Bankruptcy Code and the cases that interpret the law.  We discussed the legal test in this post, and under the law we often say that a discharge takes something close to a permanent disability preventing you from working during your adult life.  Most courts require a showing of  “the most dire circumstances” and a “certainty of hopelessness.”  However, should this be the end of the story?  Should debtors and lawyers read these cases and just acknowledge that students loans will not be dischargeable?  No, say some researchers.

Harvard researcher Jason Iuliano examined 207 adversary proceedings and found that debtors received full or partial discharges in 39% of those proceedings.  Emory University Professor Rafael Pardo and Tulane Professor Michelle Lacey found that 57% of debtors received some level of discharge, out of 115 proceedings examined.  Does this mean that it is really easier to get a full or partial discharge of student loans than we have believed all these years? Not really, as the legal standard is still a difficult task. Does it mean that 57% (or even 39%) of borrowers in Bankruptcy will get a discharge of some or all student loan debt? No, because the great majority of proceedings filed to get a discharge have some  good faith basis for showing undue hardship.  For example, in the NY Times article linked above the debtor was blind and unemployed.  The same article mentioned a Georgia case in which the debtor was a Mercedes-driving lawyer with a household income of $114,000 a year, who did not get a discharge (for the curious, here is that Court opinion).  What these studies do mean is that people facing Bankruptcy, who have educational loans, should make sure they review all of their circumstances with a lawyer to see if it is worth the time and expense of pursuing a discharge.  If there is a good faith basis for a full or partial discharge, the lender may agree to a settlement of the proceeding on favorable terms even if they believe the Court would ultimately rule in their favor.

If you are facing Bankruptcy and overwhelming student loan debt, it is vital you see a good Bankruptcy lawyer in your area who is experienced in Bankruptcy litigation and who keeps up with how the Courts rule in your state.  Contact a Georgia lawyer here, or find a very good Bankruptcy lawyer in your area for a meeting.  There is no risk in reviewing your situation, and the benefits can be tremendous.