Bankruptcy Judge Rules that Law School Grads can Cancel Bar Exam Loan Debt

March 28, 2016 Posted by kingcade

Judge Carla Craig of the U.S. Bankruptcy Court in Brooklyn, N.Y. ruled that bar-exam loan debt is a “product of an arm’s length agreement on commercial terms” and does not fall into the category of a student loan that stays with a borrower who files for bankruptcy.

This means law school graduates who file for bankruptcy protection can cancel debt they have accrued preparing for the bar exam.  This decision is the most recent ruling on the matter, which strongly contradicts the widely accepted notion that student loan-related debt can only be canceled in bankruptcy under rare cases of undue hardship.

The case involves a 36-year-old Pace University School of Law graduate, who sought to cancel the unpaid portion of a $15,000 loan she took out from Citibank to study for the bar exam.  She graduated in 2009, failed the bar exam after graduating and took a secretarial job at a hotel-management company with a $49,000 annual salary, she said. She filed for bankruptcy in 2014.

The loan was only a small portion of the nearly $300,000 in student loan debt.  But the ruling comes as consumer advocacy groups and some federal lawmakers are pushing for student loan debt relief through bankruptcy.

Recently, the U.S. Supreme Court declined to hear a case that would have made it easier to discharge student loan debt in bankruptcy, but the White House has said it would examine whether it should be easier for student loans to be wiped out in bankruptcy.  This ruling is just one step closer to student loan debt being discharged in bankruptcy.

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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

 

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