Books and School

Getting student loan debt discharged when you file for bankruptcy is generally extremely difficult. According to the 1978 bankruptcy code, borrowers have to prove that having to pay their student loan off after a bankruptcy would cause "undue hardship." What that means is open to interpretation. However, court rulings have generally sided with lenders in not discharging these loans.

Loans for K-12 Education Can Be Substantial

While most student loan debt is accumulated in college and graduate school, some people take out loans to pay for their children's education from kindergarten through high school. With the high cost of private schools these days, it's not surprising that millions of dollars of student loans are for K-12 education. Even though that's still a very small portion of the overall student loan debt in this country, a K-12 loan may be a significant amount of money to someone who's struggling financially.

So are these K-12 loans dischargeable in bankruptcy? That's the question before a court now. A Connecticut man is suing a company called Navient, which he says continued to try to collect on such a loan after his bankruptcy filing in 2011.

The plaintiff borrowed $30,000 in 2008 through Sallie Mae's K-12 Family Education Loan Program in order to help pay for his children's private high school. That, the lawsuit claims, is a violation of the Fair Debt Collection Practices Act.

Classification of K-12 Education Loans at the Heart of the Case

The plaintiff's attorney argues that the loan is a private, unsecured debt and therefore should have been discharged in his bankruptcy. He says that these K-12 loans "are not traditional student loans" and that the defendants and other lenders have used the "very murky provision in the bankruptcy code" to their benefit.

The defendants, however, argue that while a K-12 loan may not fit into the traditional student loan category, it can be classified as a non-dischargeable debt that people incur in exchange for an "educational benefit."

When a person files for bankruptcy, it's important to have the guidance of an experienced bankruptcy attorney who knows the federal bankruptcy laws in the state where the bankruptcy is filed. This can help prevent confusion, additional costs and having to go to court to settle these issues.