Here, debtor failed to prove “undue hardship” in order to obtain a discharge in bankruptcy for his student loan.

This debtor owed less than $1,800 on a student loan at the time he filed a Chapter 7 bankruptcy and sought to discharge the loan and extinguish that liability.

A debtor may discharge a student loan in bankruptcy if debtor can establish that repayment of the debt constitutes an “undue hardship.”

The Bankruptcy Code protects creditors granting student loans, to the extent they are issued by nonprofit creditors, such as credit unions, and insured by the federal government.

The debtor must, however, be able to establish that repayment of the student loan would impose an undue hardship on debtor.

Here, the court noted that debtor only earned $350.00 per month and his monthly expenses included $200 for room and board, $145 per month for a Subaru and another $35 per month to repay his mother for a loan.

The court also found that this debtor had not sincerely sought employment in the field the student loan was issued and debtor had also obtained a discharge for another student loan issued to train him to be a truck driver.

The court found that the educational loan which debtor sought to discharge comprised 41% of the total indebtedness of this individual and debtor had the ability to earn a significantly higher income.

To allow a debtor to discharge the loan would not comport with the congressional intent to curb consumer bankruptcies `motivated primarily to avoid payment of educational debts.

Hence, debtor did not produce sufficient evidence to establish that repayment of this student loan would constitute an “undue hardship” and the court, therefore, denied debtor’s discharge of this student loan. In re Phillips, 161 B.R. 945.

Author:  Charles R. Harroun, Attorney at Law