Bankruptcy and Student Loans

In recent years there has been an explosion of bankruptcy filings by students unable to repay their student loans once they leave college. Considered to be a student loan debt crisis in the US, a growing number of families and students are forced to manage hefty student loan debt that was incurred by rising cost of higher education in this country.

In Arizona, filing for bankruptcy with student loans as all or part of the debt requires special consideration. Student loans, whether federal or private, are typically guaranteed by the US Federal Government or government agency. Recent changes to the bankruptcy laws mean that essentially no student loan debt can be discharged without proving that an undue hardship exists. This undue hardship, considered by the courts to be special circumstances, must prove that the debtor cannot now (or ever) repay the loan.

In all Arizona bankruptcy proceedings, proving undue hardship goes beyond the standard bankruptcy process. An adversary proceeding will be held separately but along with the bankruptcy filing to specifically receive a ruling to discharge the student loan debt. Because they are separate, the bankruptcy court can rule to discharge the bankruptcy but the student loan debt is not dischargeable unless the court also rules favorably on the adversary proceeding.

It is important to consult with qualified bankruptcy lawyers when a student loan debt is included in bankruptcy proceedings. Jonathan Frutkin is the first Arizona attorney awarded the Distinguished Service Honor from the National Association of Consumer Bankruptcy Attorneys (NACBA) for his efforts as an advocacy leader on the issue of excessive student loan debt and bankruptcy. He and the bankruptcy attorneys at Radix Law, in Phoenix and Scottsdale, Arizona, have experience in determining if undue hardship exists, and if student loans are likely to be discharged by the bankruptcy court.