Challenging The Myth Of The Non-Dischargeable Student Loan

Conventional wisdom has it that student loans are not dischargeable in bankruptcy. The Southern District of New York said as much in a posted public document. But that assumption is wrong, or at least needs to be significantly qualified, as the chief judge from the Southern District itself explicitly stated in a recent decision, in which she cancelled the $220,000 student loan debt owed by a U.S. Navy veteran. Most people, including bankruptcy lawyers, she wrote, believe it’s impossible to discharge student loans, but this court “will not participate in perpetuating these myths.”

The debtor’s attorney in that case has made taking on student loan creditors a personal cause, as well as a specialty. Once dubbed the “Don Quixote of student debt’ by a bankruptcy judge, he has had mixed but largely successful results in court and is said to have fundamentally changed the landscape of student debt, which reached $1.7 trillion in 2020. Out of a quarter million student debtors who file for bankruptcy, fewer than 300 get their student loan debt discharged, but that’s largely because only a tiny fraction of those filers make the attempt, according to a Villanova University law professor who studies bankruptcy and student loan issues. Out of those that do, a high percentage are at least partially successful, he says.