Student loans used to be dischargeable and many people forget that they are now non-dischargeable due to changes in the law. Everyone attending higher education should be reminded several times before signing these notes that they are non-dischargeable and the same rules apply to the co-applicant or guarantor.  In a recent case  In Re: Curvtis V. and Connie S. Vitzhum,, 22 CBN 1, 2011 Wl 3957273 (Bankr W.D. Mo 9/7/11); Consumer Bankruptcy News October 13, 2011, vol 22 iss 1 ).  the parent, signed for a student loan along with their daughter  through Educap Inc. in October 2005 for their daughter’s college education.

Pursuant to Section 523(a) (8) student loans or loans to be used “for educational purposes only” are non-dischargeable. In the reported case, the parents applied along with their daughter for loans issued for her college education. . The daughter attended college and the parents fell on hard times and were forced to file bankruptcy. Since they were not the student under the loan they tried to have it discharged claiming that they did not receive any educational benefit. The court disagreed and said it did not matter,  that it still was an educational loan and therefore non-dischargeable.

The point of this case  is that student loans are almost never dischargeable to anyone who signs them regardless of whether they were the student are not. Until Congress changes this rule, it is the law of the land.  In today’s world with a year of private college costing more than $40,000 it is easy for students to get themselves in a great amount of debt.  Parents and students should know that they will be tied to with this debt until paid and bankruptcy will not remove it.

If you have any questions regarding this or other bankruptcy matters, please call me at 1-888-382-7880.