Student loans are generally not discharged in a Chapter 7 case or a Chapter 13 case. This means that student loans are not eliminated in bankruptcy and the debtor will still owe these debts after the bankruptcy case is closed. This applies not only to the students themselves who signed for their own student loans, but also for parents and others who have co-signed on their children’s or friends’ student loans. Co-signers on student loans will still owe these debts after the bankruptcy has been discharged.
There is a provision under Section 523(a)(8) of the Bankruptcy Code that allows for people to obtain a discharge of student loans in bankruptcy. The standard for discharging a student loan is when the student loan debt would impose “an undue hardship on the debtor and the debtor’s dependents.” Unfortunately, most judges who have ruled on this issue have made it very hard for a person to prove that his or her student debt constitutes an “undue hardship.” Ultimately, it is up to a judge to listen to the person’s circumstances and then to decide whether that person’s student loans should be discharged. The bottom line is that discharging student loans is very difficult and impossible in most cases.