Private Student Loan Debtors Win Limited Bankruptcy Reprieve (1)

A Tenth Circuit ruling that some types of private student loan debts can be wiped out in bankruptcy could broaden options for struggling debtors and prompt re-opening of some old bankruptcy cases.

The U.S. Court of Appeals for the Tenth Circuit held Monday that Section 523(a)(8)(A)(ii) of the Bankruptcy Code— which prevents debtors from eliminating “an obligation to repay funds received as an education benefit” absent undue hardship—doesn’t refer to student loans. The provision refers to benefits like scholarships or stipends that have to be repaid only if the recipient fails to satisfy a requirement associated with the benefit, the ...