Most Miami residents are aware that the purpose consumers file for bankruptcy under either Chapter 7 or Chapter 13 is to discharge debt that they are, for whatever reason, unable to repay. In previous posts we have discussed the types of debt that can be discharged, and the types that usually cannot, such as student loan debt.
In our last post we wrote about efforts being made by the current administration to make portions of certain types of student debt dischargeable. In this post, we have an example of this type of debt being discharged.
The debtor accumulated the student loans in 1981 when she was 33 and enrolled in a college. She did not obtain her college degree and after making payments on the loan for 25 years, five years ago she filed for Chapter 13 bankruptcy. The only debt she had when she filed was the school debt.
As part of the Chapter 13 bankruptcy, per the plan that was developed, she paid a reduced amount on the school loan over the course of five years. At the end of that time the remaining debt was $56,000 (the original loan was for $17,000), and her prospects for an increased income or windfall had not changed.
Rather than the woman entering an “income contingent repayment plan” with the program that issued the loan, wherein she would continue to pay an amount deemed to be affordable until the age of 89, a judge instead discharged the student loan debt. In granting the discharge he noted that at her current age of 64 she is facing unemployment and is not likely to have any new income other than social security in the years to come.
Source: New York Law Journal, “Rare Discharge Is Granted in Case of Student Loan Debt,” John Caher, July 17, 2012