Hello,
As the title suggests, I am writing this post to inquire if anyone is familiar with legal and political background that led to student loans being non dischargeable debt in bankruptcy. I'm interested in understanding the circumstances in which this was created.
Thank you
Luxorius
Posted Jun 15, 2018, 10:40 PM UTC
For detailed history and analysis, see here, in particular pp. 363-364: https://digitalcommons.law.scu.edu/cgi/viewcontent.cgi?article=2749&context=lawreview
So would it be worth privatizing your student loans and then filing for bankruptcy? Asking for a friend
No. They do a look back when you file for bankruptcy for quite a few years. In some cases doing something like that would be considered bankruptcy fraud.
Even private student loan are non-dischargeable.
I'm not so sure about that, but I could be wrong.
I’m a bankruptcy lawyer. Private student loans and federal student loans are treated the same under the current bankruptcy code.
wow. What if I secured a private loan, ostensibly for my own purposes, perhaps for home improvement - then used it to pay for student loans, and subequently defaulted?
[deleted]
So you can have them discharged in bankruptcy after five years?
No. The law changed in 2005. Student loans, federal and private, generally are non-dischargeable in bankruptcy regardless of how much time has passed since the debt was incurred.
Student loan debt used to be totally dischargeable before the mid seventies. Then the law changed to make student loans non dischargeable during the first five years of repayment. In 2005 Congress passed BAPCPA, which, among other things, made all student loan debt nondischargeable unless excepting such debt from discharge would cause an "undue hardship." Congress was concerned that people would take on massive student loan debt then immediately file bankruptcy and discharge the debt after graduation or soon after.
Now, courts have interpreted the undue hardship language to make it virtually impossible to discharge student loan debt in bankruptcy.
There was also the Student Loan Default Prevention Initiative Act of 1990 in the US that helped pave the way for the 2005 BAPCPA.
Edit: Although not directly what OP asked for, I feel it necessary to add to the overall picture of how/why the 2005 BAPCPA legislation was passed.