This March, The Wall Street Journal reported that law school graduates who file for bankruptcy can receive a discharge of the debt they racked up while studying for the bar exam. This ruling contradicts the widely accepted idea that federal student loan-related debt can only be discharged under circumstances of exceptional financial hardship, during a time when student loan debt has more than doubled over the past decade.
According to U.S. Bankruptcy Court Judge Carla Craig, bar-exam student loan debt does not fall into the category of student loans that stick with a borrower who files for bankruptcy. Rather, she stated that study loans are akin to consumer or commercial loans and are not an “educational benefit.”
Judge Craig’s ruling came after a case involving a 36-year-old law school graduate from Brooklyn who sought a cancellation of the unpaid portion of a $15,000 loan she took out to study for the bar exam. After failing to pass the bar exam, she accepted a secretarial job making $49,000 and later filed for bankruptcy. Although her bar exam debt represents only a small portion of her nearly $300,000 student loan debt, the ruling comes at a time when some lawmakers and a number of consumer advocacy groups are pushing for students with debt to obtain at least some relief. According to the woman’s lawyer, “we’re starting to chip away at the absolute immunity of student loans from bankruptcy.”
Although Craig’s ruling isn’t binding in all courts, it is causing judges to take a closer look at similar cases.
Struggling to pay back student loan debt? Talk to a Chicago bankruptcy attorney at Atlas Consumer Law about the options that are available in your case. We can help you take control of your situation and guide you back towards a place of financial health.
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