Student Loans Can Be Discharged in Bankruptcy Absent Hardship

Debtors can discharge student loan debt in bankruptcy without having to show undue hardship, the Tenth Circuit ruled on an issue of first impression.

Section 523(a)(8)(A)(ii) of the Bankruptcy Code doesn’t allow a debtor to wipe out “an obligation to repay funds received as an educational benefit, scholarship, or stipend.” That section does not refer to student loans, the the U.S. Court of Appeals for the Tenth Circuit held Monday.

Monday’s decision, which upholds a ruling from a bankruptcy court, is a major shift from what had been the traditional view that student loans can’t be discharged except in cases ...