For those who have worked hard to repay their debts, and still find it impossible to do so, filing for bankruptcy is an option to obtain a fresh start. When Congress overhauled the bankruptcy system in 2005, many consumers looking for debt relief were discouraged to find that student loans could not be forgiven unless they met extremely difficult situations defined under the law. A recent appeals court ruling may have reinstated hope for those who are hoping to reorganize debt and file for personal bankruptcy as a way to obtain financial freedom.
After failing to pass the bar exam three times, an Oregon law student obtained a job in a new field, and found he could not repay his student loans. When he filed for bankruptcy and had his debts forgiven by the court, his debts were then reinstated by a judge who felt the man and his wife had not done all they could to repay their loans.
An appeals court recently reversed that decision in a ruling that may help to more clearly define the requirements for erasing student loan debt during bankruptcy. The appeals court felt that repaying the loans would create undue hardship on the man’s family, and that he had done all he could to repay them.
This ruling may be significant for future cases of personal bankruptcy by holding lenders accountable as well as borrowers for excessive loan amounts and difficult repayment terms. Consumers who have worked hard to repay borrowed money and simply can’t find the means to do so may benefit from the financial fresh slate that is available with filing for bankruptcy.
Source: CBS Money Watch, “Court opens of hope for student debtors window,” Charles Wilbanks, May 27, 2013