Yes Virginia-student Loans Can Be Discharged in Bankruptcy (part 2)

By Jay Weller

student-loan- tomwang-26400638_sThis is our Second Part in our Blog Article regarding the Discharge of Student Loans in Bankruptcy.  Please refer to Part One for context and understanding.

The Cases of Tetzlaff and Conway teach us some valuable lessons in terms of when a Student Loan may be Discharged in Bankruptcy.  One such lesson is that in Legal Matters, the Facts often determine the Law.  Mr. Tetzlaff appears to be a much less reputable Debtor than Ms. Conway.  Mr. Tetzlaff did not appear to hold any sort of employment, never attempted to repay his Student Loans and claimed his inability was due to among other factors, alcoholism and depression.  Ms. Conway held various positions, in which she was laid-off, did have employment as a waitress and attempted to pay her Student Loans.  Ms. Conway is a more sympathetic Debtor, at least based upon those facts.

In determining whether a Student Loan may be Discharged, at least upon the facts of these two cases, and the Law as announced in Brunner, and perhaps in Conway, these are the qualities the Courts will examine in determining whether a Student Loan should be Discharged in Bankruptcy:

  1. Did the Debtor make an attempt to repay the Student Loan?
  2. Did the Debtor enter a Debt repayment program, such as the program announced by the Federal Government where the Student Loan Debtor’s monthly income and expenses is used to determine what he or she is able to contribute monthly to Student Loan payments, and the Debtor can receive forgiveness of whatever balances are remaining on the Student Loans after a twenty year repayment period.
  3. Did the Debtor make a concerted effort to gain employment, including in the field of which is the subject of their Collegiate Degree?
  4. Did the Debtor make an effort to gain any form of employment that would enable them to make payments on their Student Loan? That Ms. Conway took employment as a waitress, presents to the Court a more sympathetic character, who does not portend that she is “above” any form of employment (don’t get me wrong, most waitresses are probably much more honorable in their profession than most of the journalists in the United States presently). How diligent was the search of the Debtor for gainful employment?  How many resume’s did the Debtor send to prospective employers?  How many interviews did the Debtor attend?
  5. What are some physical factors that are creating difficulties for the Debtor to make payments on the Student Loan and what is the likelihood that those factors will continue indefinitely. For example, if a Debtor had physical handicap that prevented him from obtaining gainful employment, such status would be looked at more favorably than Mr. Tetzlaff’s alcoholism.
  6. Does the Debtor have Dependants?
  7. What type of Degree did the Debtor earn? Ironically, and probably contrary to sound Public Policy, if a Debtor earns a Degree in a field in which there probably is not much available employment, such as Ms Conway’s Media Communications Degree, the resulting Student Loans would be more likely to be Discharged in Bankruptcy than Mr. Tetzlaff’s Law Degree.  A Law Degree makes available employment in a number of endeavors, including employment as an Attorney, a Paralegal, in Law Enforcement, Public Service, and other avenues.  Prior to the Obama Administration, Student Loans were procured partly by the applicants chosen field of study.  An applicant in the STEM fields (Science, Technology, Engineering and Mathematics) was more likely to be the recipient of a Student Loan than an applicant seeking to study Sociology, or Early American Literature, for example.
  8. Are there any other circumstances that exist that will prevent the Debtor from being able to pay his or her Student Loan for an extended period of time?
  9. Did the Debtor file a Chapter 7 or a Chapter 13 Bankruptcy? The author believes that if a Debtor chooses to file a Chapter 13 Bankruptcy, seeking to pay back his Student Loan through a reduced and reorganized payment over a five year period, rather than seeking the outright Discharge of the Student Loan through a Chapter 7 Bankruptcy, the Bankruptcy Judge would look more favorably upon the Debtor seeking the Discharge.

If you have a Student Loan and am considering whether to file Bankruptcy to seek the Discharge of the Student Loan, please contact my Law Office at either 1-800-407-3328 or 727-539-7701.  I will be able to speak with, or meet with you directly, to discuss whether such Student Loan can be Discharged in Bankruptcy.  Weller Legal Group has Offices located throughout the Tampa Bay area, including Clearwater, Port Richey and Lakeland.

Image credit: tomwang