Unqualified pupil loans may be paid within the occasion of chapter
You can bankrupt your unqualified student loan. Most student loans are “qualified” student loans and cannot go bankrupt. Not so with unqualified student loans.
What are Unqualified Student Loans?
Student loans are typically exempt from bankruptcy relief at 11 USC 523 (a) (8). This section of the Bankruptcy Act prevents the discharge of four different categories of educational loans:
- Loans issued, insured or guaranteed by a government entity;
- Loans financed in whole or in part by a government entity or a non-profit organization;
- Obligation to repay funds as educational achievement, scholarship or scholarship; and
- Any “Qualifying Education Loan” within the meaning of Section 221 (d) (1) of the 1986 Internal Revenue Code (“IRC”).
The last category is the one we are examining here. For the purposes of IRC 221 (d) (1), a “qualifying educational loan” is “any debt incurred. . . just to pay qualified college costs. “
So to be a “qualified educational loan” the debt must be high solely made for qualified college editions. If a private student loan is partially outside the cost of attending a particular educational institution, the entire loan will not be eligible and may be repaid. The IRC defines “cost of attendance” as “tuition, books, and a reasonable allowance for room and board”. Loans that go beyond certified federal lines can go bankrupt.
Make your case
Unqualified private student loans that exceed the “participation fee” are cancellable. However, you must file an objection procedure in your bankruptcy under Chapter 7 to request that the court consider these loans to be relieved.
Courts interpret exemptions from the discharge against creditors narrowly. So the lender must (and will) take action against your opponent’s case and prove his case, otherwise your chapter 7 loan will be repaid.
You need to carefully document and calculate your loan amounts and the purposes for which you have used the funds. You also need to determine the cost of attending the facilities you attended. Student lenders don’t just roll over in these cases, so you need to be ready to take your case.