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Bankruptcy case looks at issue of discharge for private high school education, P.2

Last time, we began looking at an out-of-state case which raises the question of whether student loans incurred to pay for private high school tuition may be discharged in bankruptcy. In this case, the lender is arguing that the undue hardship requirement applies to the student loan debt because it falls in a third category of debts: those incurred for an "educational benefit."

While the lender in the case is making the loan out to be special, the father is arguing that the loan was an ordinary private, unsecured debt and that its discharge was proper since it should be discharged just the same as other such loans in bankruptcy. It remains to be seen what will become of the case, but it is interesting to note that the case law does not provide a clear answer on the issue. 

The case naturally raises questions about the wisdom of taking out significant private loans to pay for high school education, but borrowers can find themselves in such situations easier than might be thought by some. Whatever the circumstances of a case, those who struggle with student loan debt, most of whom will have incurred that debt for post-secondary education, need to understand their options for relief and assistance.

The majority of borrowers who struggle with student loan debt are going to be unable to have it discharged in bankruptcy, but filing for bankruptcy does give a debtor the ability to obtain relief with respect to other debts. In some cases, at least, this can be enough to get a debtor back on their feet financially speaking. 

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