Circuit Court Approves Student Loan Debt Discharge
The Seventh Circuit Court of Appeals ruled that a “destitute” paralegal was entitled to a bankruptcy discharge of her remaining student loan debt. Susan M. Krieger, 53, received her educational loans 11 years ago. She filed for bankruptcy because she has been unable to find work while living with and caring for her elderly mother in a rural area of Illinois.
The bankruptcy judge agreed to discharge her student loan debts as requiring their repayment would be an undue hardship. A federal district court reversed the decision. The judge found that good faith entails commitment to future efforts to repay the debt.
The Seventh Circuit reversed and agreed with the discharge decision. The opinion stated that requiring such future good faith efforts goes against the purpose of bankruptcy. It reasoned that if such efforts were required, then no student loan debt could ever be forgiven because a person’s situation could possibly improve at some point in the future.