San Jose Bankruptcy Attorney advises consumer to watch Supreme Court ruling on whether student loans can be discharged in bankruptcy.
San Jose Bankruptcy Attorney advises consumer to watch Supreme Court ruling on whether student loans can be discharged in bankruptcy.
The U.S. Supreme Court recently heard arguments on what form of hardship hearing must be used to allow a student loan to be discharged in bankruptcy. Current federal law does not allow for student loans to be discharged without a hardship hearing to demonstrate that repaying the loan would create an undue hardship on the borrower.
The case before the court comes from a 1992 bankruptcy filing by Francisco Espinosa, a student who attended an Arizona trade school, and after amassing more than $13,000 in student loan debt, filed for bankruptcy protection. The bankruptcy court judge allowed him to pay off part of the loan and discharge the remainder in his bankruptcy when the student loan lender agreed to the bankruptcy plan and raised no objections to the bankruptcy filing by Espinosa
The issue is closely watched by observers on both sides of the issue. The U.S. Department of Justice sided with the lender before the Supreme Court, arguing that the U.S Department of Education guarantees the loan, and without the bankruptcy court protection, many lenders would refuse to fund student loans.
Espinosa’s attorney argued that once a bankruptcy discharge is finalized, it cannot be reopened based on any errors that a judge may have made. A ruling on the case is expected by summer.
Supreme Court to decide on student loans and bankruptcy, USA Today, December 2, 2009
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