Most consumers facing bankruptcy also have student loans. Under the current law, there are very few instances in which a debtor can use bankruptcy to discharge their student loans.
Under the Bankruptcy Code, Congress created certain exceptions to discharge of debt. Student loans are specifically excepted from discharge under Sections 523(a)(8)(A)(ii) and 523(a)(8)(B):
“(a) A discharge under section727,1141,1228(a),1228(b), or1328(b)of this title does not discharge an individual debtor from any debt—
(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—
(A)(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or
(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual;