Student Loans in Bankruptcy

The particular law relating to the discharge of student loan obligations in a Chapter 7 Bankruptcy are found in Title 11. U.S. Code, Section 523:

§ 523. Exceptions to discharge
"(a)(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for..."

..."(A) (i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or
(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual....."

Case law suggests that Student loans are rarely dischargeable with few exceptions. The exceptions usually entail circumstances in which a school falsely advertised their credentials or acceditation status and, in reasonable and justifiable reliance upon the false accreditation claim, a debtor in bankruptcy incurred financial obligations to receive that accreditation which was, in fact, not available and, the debtor received no benefit therefrom, and, the debtor did not receive the money directly but rather the school did, and, the debtor, after attempting to gain employment, was not qualified for employment due to the false claim.