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21 Dec The Worst Debt You Can Have: Student Loans (Part One)

I'll bet that if you asked the average person what debt is the worst kind of debt, he'd say taxes. But owing student loans is, ironically, far worse than owing Uncle Sam. During my next few posts, I'll examine exactly what a student loan is, a bit of history of how the Bankruptcy Code has dealt with student loans over the last few decades, current bankruptcy rules regarding discharging student loans, and various approaches to dealing with student loans. Why should you care? Because student loans are one type of debt that is non-dischargeable in bankruptcywell, almost non-dischargeable. To begin, let's look at what a student loan is and what it's not. Section 523(a)(8) contains the so-called student loan exception to discharge. The exception applies to:
  • 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 a nonprofit institution; or
  • for an obligation to repay funds received as an educational benefit, scholarship or stipend; or
  • any other education loan that is a qualified education loan, as defined in section 221(d)(1) of the federal tax code.
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