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Can tuition and fees be discharged in bankruptcy?

Submitted by Manzi on Sat, 10/23/2010 - 14:33
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My husband is attending a local community college and he has not paid several thousand dollars in tuition and fees. Because I just lost my job we are thinking about filing for chapter 7 bankruptcy and I was wondering if his tuition and fees can be discharged. Thanks.

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tuition in bankruptcy

Submitted by The Editor on Sun, 10/24/2010 - 08:39.

My understanding is that if you have a student loan, even if that loan was made by the school itself, the debt cannot be discharged.  So, if your husband signed a promissory note, that would be considered a student loan, and the debt will not be discharged.  However, if your husband attended classes and, for whatever reason, did not pay the tuition and fees in a timely manner, then that debt may be discharged.  However, this is a bit of a grey area, and you should definitely encourage your husband to discuss the matter with a bankruptcy lawyer before he files.  Good luck. 

Discharging student loans in Bankruptcy

Submitted by lisa99 on Thu, 11/04/2010 - 11:53.

I agree with the editor. Although the bankruptcy laws have recently changed anything to do with a student loan or owing the state or federal government can not be discharged. See below: Generally, student loans are not discharged in bankruptcy. In 11 U.S.C. sec. 523(a)(8)
 
There are two exceptions to this general rule: The student loan may be discharged if it is neither - Insured or guaranteed by a governmental unit, nor - Made under any program funded in whole or in part by a governmental unit or nonprofit institution. The student loan may be discharged if paying the loan will "impose an undue hardship on the debtor and the debtor's dependents."
 
 Student loans more than 7 years old used to be dischargeable under certain circumstances, but this provision was removed by an appropriations bill passed in October of 1998. Whether an exception applies depends on the facts of the particular case and may also depend on local court decisions. Even if a student loan falls into one of the two exceptions, discharge of the loan may not be automatic. You may have to file an adversary proceeding in the bankruptcy court to obtain a court order declaring the debt discharged.

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