«The U.S. Department of Education (Department) seeks to ensure that the congressional mandate to except student
loans from bankruptcy discharge except in cases of undue hardship is appropriately implemented while also ensuring that borrowers for whom repayment of their student loans would be an undue hardship are not inadvertently discouraged from filing an adversary proceeding in their bankruptcy case.
A FFELP discharge is an administrative matter, handled by the Department of Education (DOE), and is completely separate and
distinct from a bankruptcy discharge based on § 523 (a)(8)'s undue hardship standard.
«The U.S. Department of Education seeks to ensure that the congressional mandate to except student
loans from bankruptcy discharge except in cases of undue hardship is appropriately implemented while also ensuring that borrowers for whom repayment of their student loans would be an undue hardship are not inadvertently discouraged from filing an adversary proceeding in their bankruptcy case,» according to an Office of Postsecondary Education, U.S. Department of Education statement.
Any plan you design to pay off your debts in a chapter 13 bankruptcy has to allow for normal living expenses, making timely payments on all secured assets you want to keep, maintaining payments on debts
exempt from bankruptcy discharge, paying any arrears on secured assets you are keeping, and paying a percentage of what is remaining of your income to unsecured creditors in a priority manner.
In addition to preservation of government aid, one of the popular reasons given for excluding student loans
from the bankruptcy discharge is fraud prevention, the idea being that the degree students receive is an asset that must be paid for, their repayment obligations shouldn't be wiped away in bankruptcy.
Similarly, if a credit card is used only for qualified higher education expenses, the interest is deductible (and the debt is excepted
from bankruptcy discharge).
In order to discharge student loan debt, the debtor is required to provide proof that undue hardship exists or will exist in the future if the debt is excepted
from bankruptcy discharge.