U.S. Supreme Court Denies Appeal in Student Loan Bankruptcy Case

On Monday, the U.S. Supreme Court declined to hear a case on whether people declaring bankruptcy should have an easier time erasing student loan debt in the process, The Wall Street Journal reported.

The court, in a brief written order, said it would not consider an appeal by an unemployed Wisconsin man who owes more than $260,000 in student loan debt from business and law school. The man filed for chapter 7 in 2012, a form of bankruptcy that liquidates an individual's assets, and sought to have his student loan debts discharged, but courts declined to do so.

A decades-old law prohibits Americans with taxpayer-backed student loans from canceling that debt in bankruptcy unless they can prove they face an "undue hardship," a vague phrase that has led to uneven interpretations in the courts. A 2005 law extended the prohibition to non-federal student loans. Consumer advocates say the three-part test most bankruptcy judges use to determine hardship is too strict, leading the vast majority of borrowers to be denied relief of their student loans.


Related Links

The Wall Street Journal