Discharging student loans in bankruptcy has always been quite difficult under the standards that the debtor is required to prove a somewhat cost-prohibitive piece of litigation if the student lender is going to fight. Further, each case is quite fact-specific, so your facts may be slightly different from the next person. A recent case out of the 8th Circuit Bankruptcy Appellate Panel may be a slight shift in favor of the students.
In In re Conway, No. 13-6016 ( 8th Cir BAP Aug. 21, 2103) the appellate panel remanded the case back to bankruptcy court, holding that the lower court had erred in finding that the student, chapter 7 debtor, had “reasonably reliable future financial resources” to repay her multiple student loans in excess of $70,000. In Ms. Conway’s case, she put on evidence of her multiple part-time and temp jobs, what she earned, and how she had sent out over 200 resumes in her field without any success or job offers. The BAP found that despite her “diligent efforts to find higher paying work” the court would not “substitute assumptions or speculation for reasonably reliable facts” about her future possibilities.
This case is one piece of good news for students in today’s job market and economy. It is not tested in our courts in Kentucky yet, but time will tell and it is one tool to now use in attempts to restructure, write off through settlement, or go to court to try to wipe out all or part of student loans.