In a recent Houston, Texas bankruptcy court case, a debtor argued that her private student loans should be discharged in her 2008 bankruptcy case, because the loans were incurred in 2004. The loans were consolidated in 2006, and she and her husband filed bankruptcy in 2008.

The bankruptcy court, U.S. Bankruptcy Judge Letitia Paul presiding, held that the date that the bankruptcy was filed controls. Since private student loans became non-dischargeable in bankruptcy cases beginning in October, 2005, any bankruptcy filed after that date would not result in the discharge or cancellation of the loans, absent proof of "undue hardship."

In this case, the debtor earned $5000 per month as a dental hygienist, and she did not plead or prove that repaying the loans would cause her undue hardship. Therefore the private student loans were held to be non-dischargeable in the bankruptcy case. Shaw v. Educap, Inc., Adversary Case No. 13-3251, in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division.

Do you think this is a correct decision? Should student loans be dischargeable in bankruptcy? Why or why not? Please share your comments or questions below.


J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization
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