This March, The Wall Street Journal reported that law school graduates
who file for bankruptcy can receive a discharge of the debt they racked
up while studying for the bar exam. This ruling contradicts the widely
accepted idea that federal student loan-related debt can only be discharged
under circumstances of exceptional financial hardship, during a time when
student loan debt has more than doubled over the past decade.
According to U.S. Bankruptcy Court Judge Carla Craig, bar-exam student
loan debt does not fall into the category of student loans that stick
with a borrower who files for bankruptcy. Rather, she stated that study
loans are akin to consumer or commercial loans and are not an “educational
Judge Craig’s ruling came after a case involving a 36-year-old law
school graduate from Brooklyn who sought a cancellation of the unpaid
portion of a $15,000 loan she took out to study for the bar exam. After
failing to pass the bar exam, she accepted a secretarial job making $49,000
and later filed for bankruptcy. Although her bar exam debt represents
only a small portion of her nearly $300,000 student loan debt, the ruling
comes at a time when some lawmakers and a number of consumer advocacy
groups are pushing for students with debt to obtain at least some relief.
According to the woman’s lawyer, “we’re starting to
chip away at the absolute immunity of student loans from bankruptcy.”
Although Craig’s ruling isn’t binding in all courts, it is
causing judges to take a closer look at similar cases.
Struggling to pay back student loan debt? Talk to a Chicago bankruptcy
attorney at Sulaiman Law Group, LTD about the options that are available
in your case. We can help you take control of your situation and guide
you back towards a place of financial health.
Ready to get started? Fill out an
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