Of interest to individuals considering bankruptcy with student debt, a bankruptcy judge in Texas has denied a request by the student loan company, Navient, to dismiss a class action suit accusing the company of collecting on loans discharged through bankruptcy.
As the case moves forward, it may provide the appellate court the opportunity to ring in on the question of whether loans historically exempt from bankruptcy discharge can now be considered when wiping the slate clean in a chapter 7 bankruptcy.
“This is one to watch for potential” says a spokesman for the Consumer Law Center. The ruling offers a ray of hope to thousands of struggling borrowers straddled with education related debt in a time when the department of ed is already scrutinizing the high standard student loan borrowers have to meet to discharge debt.
Although the class action case centers on money loaned to borrowers for unaccredited programs, such as pricey bar exam study courses, a ruling in favor of the plaintiffs could translate into debt relief for borrowers who have taken similar loans from other companies.
Funds received as an “educational benefit” are non-dischargeable under bankruptcy, but the question is “what is an educational benefit?” Many believe that judges have been interrupting the category too broadly by including every endeavor to advance ones education where it should be limited to conditional grants as originally conceived. It appears that borrowers and their attorneys are staring to push back and it may result in debt relief for many.
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