Educational loans are an exception from discharge unless the debtor can show undue hardship like inability to get a job, medical challenges, of the debtors or his dependent.
What is Hardship?
Hardship includes poor prospect for future employment. (King v. Student Assistance Corp, 368 B.R 358 (Bankr. D. Vt. 2007: debtor entitled to hardship discharge based on psychiatrist’s diagnosis of debtor’s bo-polar and post traumatic stress disorder_ Ferrin v. College of St. Catherine 2007. Bank, LEXIS 1573 in which debtor had held 40 previous jobs, all at $10 per hour or less, owing to his inherently combative personality and social aversion. In another case (In Re Turner, 69 b.R. 62 (Bankr. D. Minn, 1986), the court must look at debtor’s estimated future income and expenses. If a debtor fails to finish school, lack of good job prospects is less compelling. the hardship must exist in good faith and may not be self imposed. For example, a debtor with significant clinical depression and anxiety disorder who never practiced law would likely be entitled to discharge a student loan obligation. (In re Pelkowski, 990 F. 2d 737 (3d cir. 1993) Likewise a debtor who was deaf since birth and whose child suffered from psychiatric disorders was entitled to a discharge of student loan obligations for undue hardship. (Harrington v. Educational Credit Management Corporation 2005 Bank. LEXIS 349) Likewise, the debtor’s obligation to practice medicine in Ohio in exchange for Ohio state tuition subsidies for debtor’s medical school education was not the kind of educational loans contemplated by the bankruptcy Code Section 523.
Court split on whether the bankruptcy court is authorized to permit discharge of only a portion of a loan on the undue hardship ground or fashion a new or modified schedule.