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Bankruptcy case looks at issue of discharge for private high school education, P.1

On Behalf of | Apr 19, 2016 | Bankruptcy |

We have previously looking on this blog at the requirements for student loan debt to be discharged in bankruptcy. As we noted, it is very difficult for a debtor to meet the requirements for discharge, and it is generally the case that most debtors will not be able to discharge these student loan debt.

Student loan debt is not always associated with post-secondary education. Though it doesn’t happen very often, in some cases, parents take out student loans to send a child to a prestigious private high school. Can such loans be discharged in bankruptcy? An ongoing bankruptcy case in Connecticut raises this question.

The situation in the case is that a father took out student loans through Sallie Mae for a child’s private high school education and had the loan debt discharged in a bankruptcy case he filed for several years later. A new lender who had acquired the debt, however, continued to attempt to collect on the debt after the discharge, prompting the father to sue for violation of the Fair Debt Collection Practices Act. 

Experts in bankruptcy law say that the bankruptcy code isn’t entirely clear whether student loans used for K-12 education qualify for discharge. The undue hardship requirement, which makes it very difficult to discharge student loan debt, applies to loans incurred for education benefit and be originated or guaranteed by the government or for a qualified education loan–for higher education. In this case, the lender is arguing for another category to which the requirement applies.

In our next post, we’ll continue looking at this case and what the possible outcome might be. 


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