How Some Student Loans Might Be Canceled

By Marrero, Chamizo, Marcer Law, LP,

Some Florida residents might believe that student loans cannot be discharged in a bankruptcy. While this is generally true, there are some exceptional circumstances in which it may be possible to get student loans discharged by the government. For example, student loans may be discharged if the school closes or engages in fraudulent activity. In the former case, the student must have been enrolled within 120 days of the school’s closure.

There are several examples of the latter case. One is if the school falsely certified the student’s eligibility for the loans or signed the student’s name to a loan. Another is if the student trained for a career field that student cannot enter for reasons including disability or a criminal record. If a school fails to pay a refund to a lender or the federal government, that portion of the loan may also be discharged. These examples apply to loans from the FFEL program and the Direct Loan program. If a school violated state laws in some way, this may also be a reason for discharge.

Some personal circumstances can result in the discharge of student loans. There is a Total and Permanent Disability discharge. Finally, in cases of undue hardship, loans may be discharged although there is no strict definition of the term.

A person who has few assets and a low income may qualify for a Chapter 7 bankruptcy. This is a type of bankruptcy that allows all eligible debts to be discharged although a person may still be required to pay back student loans. However, a bankruptcy may make it possible for a person to manage the debt load from student loans. In general, tax debts also cannot be discharged in bankruptcy. Credit card debts, medical debt and a number of other different types usually can be.