Bankruptcy courts have discharged debt incurred through vices, such as casino gambling, but student loans are almost impossible to evade because of the possibility of bankruptcy abuse. You can "pardon" student loans in a few cases, but this is usually extremely hard to prove. The most likely scenario to handle your debt is to restructure it.
History
Private student loans became non-dischargeable if the borrower filed a bankruptcy case after October 7, 1998. Even then, a borrower could only discharge student debt after it had been in payment status for seven years and the originator did not receive funding from a nonprofit organization. Federal student loans have always been non-dischargeable except for undue hardship.
Undue Hardship
As of 2010, you can only pardon student loans--federal or private--if paying them back presents an "undue hardship" after Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Technically, "undue hardship" can mean anything, but the courts almost always only consider a severely debilitating injury, such as paralysis, an undue hardship.
Other Possible Reasons
The other reasons to pardon old student loan debt are usually less likely than experiencing a severe disability. You can discharge debt, for example, if you die or the college you attended closed before you could complete your degree. Another possibility is identity theft that lead the lender to authorize the loan under false pretenses, such as a forged signature. Some programs, such as Teach for America, allow you to forgo some student loan debt.
Potential
A few bills bounced around Congress in 2010 that would ease the restrictions on discharging student loan debt. While some say it would entice people to take out student loans, get a degree and then declare bankruptcy, some politicians argue that this is unlikely, because nobody likes going through bankruptcy.
Tip
Student loan lenders often trade debts back and forth, so you may owe more than you should and get to object to the balance under a Chapter 13 plan. Alternatively, you might be able to consolidate your loans into one payment under a Chapter 13 restructuring plan. In Chapter 13, you repay debts over three years to five years based on what you can afford.
Tags: student loans, loan debt, pardon student, student loan debt, undue hardship, student loan, under Chapter