By Professor Michaela White
In any chapter of the Bankruptcy Code, student loans are nondischargeable unless the debtor can show that repayment results in “undue hardship.” But the outcome of a Chapter 13 appears to be worse for the stressed borrower. In Chapter 13 cases a greater economic hardship results than if the student loan borrowers had sought and obtained a Chapter 7 discharge. Why are we penalizing debtors who try to repay nondischargeable student loans in a Chapter 13? Doesn’t this frustrate the goal of the 1978 Code (a fresh start for the “honest but unfortunate debtor”) and . . .
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