Interviewer: What if it was just government subsidized ones?
A. Campbell: It used to be until 1997, and that applied to governmental ones. There is one exception. You can get your loans discharged if you meet a strict test. The case everyone cites is “Bruner versus New York” and it’s a highly fact specific set of circumstances.
Bruner versus New York: If It Is Proven You Cannot Maintain a Minimal Standard of Living Due to Student Loan Payments, It May Be Possible to Discharge the Debt
If you’re a debtor and you cannot maintain, based upon current income and expenses, a minimal standard of living for you and your dependents, you may be able to discharge the debt.
For example, if you have a health condition that prohibits you from working, if you are disabled and you’ve made good faith efforts to repay the loans and you can’t do it and you have no likelihood of being able to repay those loans in the future, then you can obtain an undue hardship, but it’s very difficult.
The Discharge Is Extremely Difficult to Obtain
I’ve had clients who were physically unable to see. Now they might have 10% vision, but they’re legally blind. They are disabled. The Social Security Administration has provided benefits and declared them disabled.
Can they get out of their student loans? No, they couldn’t. What they would do is every year is they would review her situation. This particular client had a PhD. She had been a consultant. So just simply because you are visually impaired doesn’t necessarily mean you can’t still get an income and make money, it just makes your life a lot harder.
Interviewer: Student loans are the most mercenary, cold-blooded loans I’ve ever heard of.
Why Have the Laws Changed Regarding Discharging Student Loan Debt in Bankruptcy?
A. Campbell: What happened was the common myth was that it’s mainly the lawyers and the doctors who poisoned the whole system because in the 80s and 90s, student loan debt was dischargeable. If you follow the news stories, a lot of what you hear is completely false, but the bigger lie, the more widespread it is. That’s true for the reason why they changed the bankruptcy laws in 2005 was they thought that everyone was scamming the system. Actually that’s not true.
Interviewer: The myths of the immoral debtor.
It Is Not Possible to Contain the Fraud in Any System
A. Campbell: There are people who do scam the system yes, of course, but they’re going to exist in any system. You’re going to have fraud in every system. There’s things that you can do about it, but it cost more than it’s worth in most cases to completely get rid of it. You can get rid of 80% of it, but there’s always going to be a little bit left over and they get the big news and that’s really false. It didn’t have that big of an impact.