You can go here to read an index of my posts on student loans and bankruptcy. The press of busyness this fall had prevented me until from posting about an August decision by the Eighth Circuit. It should be of interest to some folks burdened by student loans. (Unless the newly elected president waives the wand of an Executive Order and makes all student loans disappear in a flash, in which case, never mind.)
In McDaniel v. Navient Solutions LLC (In re McDaniel), the Tenth Circuit Court of Appeals held that so-called Tuition Answer Loans are dischargeable unless the loan was made (or insured or guaranteed) by a governmental unit or nonprofit institution. What is a Tuition Answer Loan? I don't know the origins of the term but according to the Tenth Circuit such loans are ones made for living expenses and the like of a student who is aso receiving educational benefits. In other words, to be nondischargeable, the loan must be closely tethered to the cost of a student's education, not merely the costs of staying alive.
I do not know whether private Tuition Answer Loan are common. (Recall that Tuition Answer Loans made, insured, or guaranteed by the government or a non-profit are nondischargeable.) Regardless, this gap in the wall of nondischargeability will help some and force private lenders to make and price loans loans by risk rather than relying on a bankruptcy subsidy.
(For a more detailed analysis of this case go here.)
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