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Since October 2005 no student loans are automatically discharged in bankruptcy.
Discharge is Possible if “Undue Hardship” Test is Met
Bankruptcy Courts have been unwilling to allow individuals to discharge student loans unless the individual can prove to the Court that the person would suffer an “undue hardship” if forced to repay the debt. In practice, courts have granted student loan discharge if the filer has shown he or she is completely unable to work in the trade or profession the student loans were taken out to prepare the filer for or if the person seeking discharge owed massive student loan debt and was of typical retirement age when seeking discharge.
Proceeding Needed to Discharge Student Loans
For a bankruptcy client to possibly discharge student loan debts the client would have to file what is known as an adversary proceeding within the client’s bankruptcy case for which an additional filing fee and additional attorney’s fees would apply.