Appellate court allows woman’s student debt to be discharged

One of the topics we often discuss here on this blog is the nearly impossible task of discharging student loan debt. Many students leave college with a degree that is supposed to help them land a career-launching job; but with the job market still relatively unstable, this degree saddles post-graduates with immense debt and only a slightly improved chance of obtaining work.

There seems to be a growing movement, both at the local and federal levels, to try to make this sort of debt discharge possible. Chapter 7 bankruptcy allows the filer to clear out much of the debt they have. Sometimes this can be all of it; but in many cases, there is still a little bit of debt left over because it is protected (like with student debt).

However, one woman has just achieved a rare feat; her $25,000 debt attributed to her remaining student loans has been discharged.

The case is unique for other reasons. The initial bankruptcy court actually allowed the debt to be discharged, only for a superior federal court to overturn the determination. That decision was then sent up to a federal appellate court which reinstated the bankruptcy court’s original decision to discharge the woman’s student debt.

Though it may seem insignificant given how rare these decisions are, there certainly is a growing mindset that, sometimes, certain individuals need their student debt discharged; otherwise they will suffer undue hardship, which does not help the debtor or the creditor. Maybe someday soon we will have new rules that allow student debt to be discharged more easily.

Source: ABA Journal, “7th Circuit OKs $25K student-loan discharge for ‘destitute’ paralegal,” Martha Neil, April 10, 2013

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