Articles Tagged with student loans

By Alfred Villoch, III, Esquire, at Savage, Combs & Villoch, PLLC

In a recent blog post, the Bankruptcy Blawg addressed how difficult (almost impossible) it is to get rid of student loan debt in bankruptcy.  See http://www.thebankruptcyblawg.com/?p=26. Yesterday, the Tampa Bay Times published an article entitled “Co-signing a student loan carries risks for parents.” The article addresses how parents can feel a knee-jerk, moral obligation to co-sign for their child’s student loan.  But when you co-sign, the parents are on the hook for the debt with equal force as if the loan was theirs alone.  And they might not know that their child is not repaying the loan until they start receiving calls and letters from the bank.  By that time, the parent’s credit score has very likely taken a dip, noted Mark Kantrowitz in the article.

Not only is the student loan default potentially devastating to the parent’s credit score, but it is virtually impossible to discharge in bankruptcy unless a bankruptcy court finds that the parent meets the Brunner test.  See http://www.thebankruptcyblawg.com/?p=26.  That means, the parent or the child must repay the entire debt (with interest and late fees, if applicable) or it may haunt the parent and child for the rest of their lives.

By Alfred Villoch, III, Esquire, at Savage, Combs & Villoch, PLLC

Student loans are very difficult to get rid of in bankruptcy.  Whether you file bankruptcy under chapter 7 or chapter 13, the test remains the same: you have to prove “undue hardship” in order to discharge or get rid of your student loans.  See 11 U.S.C. § 523(8).

But what is undue hardship?  Unfortunately, the Bankruptcy Code does not define “undue hardship” or list any ways in which to determine who meets that standard.  Instead, bankruptcy courts have been left to make their own definition through case law. In Florida, bankruptcy courts follow the Brunner test. This test requires the court to consider the following three categories or prongs to determine whether the debtor (i.e., the person who filed bankruptcy) has an undue hardship: