Graduates burdened with heavy student loan debt
loads often hear how difficult it is to discharge
this debt through the bankruptcy process.
This is correct, at least to some extent. In order to
discharge student loans in bankruptcy, the debtor
must file a parallel case, called an adversary
proceeding in bankruptcy lingo, and then persuade
a judge that the student loans are causing
an exceptional “undue hardship” in their life.
But there are sometimes ways to avoid this
procedure. One is to seek a discharge for tuition
directly.
The “adversary proceeding” and “undue hardship” rules
apply to student loans. Tuition billed directly by
the school to the student isn’t a student loan – its
tution. And “tuition” isn’t subject to the
undue hardship analysis.
Directly billed tuition is more often seen in trade schools
than in colleges or universities, but in the end, if
what you have is a tuition bill, rather than a student
loan, it is relatively easy to get rid of it with
a simple chapter 7 bankruptcy case.
If you are in doubt as to whether your student debt
is a loan or a tuition bill, remember that the hallmark
of a loan is a signed promissory note. If
there’s no note, what you have is likely a straight
tuition bill, and easily dischargeable.