U.S. Appeals Court Won’t Make Student Loans Easier to Discharge - ABI

A Texas woman can’t unload thousands of dollars in unpaid student loans through bankruptcy, a federal appeals court said, a setback for consumer lawyers hoping her case could weaken the high bar for student borrowers to discharge educational debt, WSJ Pro Bankruptcy reported. The U.S. Court of Appeals for the Fifth Circuit on Tuesday ruled against Vera Frances Thomas, who has struggled to maintain employment because of a degenerative nerve disease and sought relief from more than $7,800 in student debt. The ruling comes as some judges, experts and politicians re-evaluate the legal hurdles preventing individuals in difficult financial straits from using bankruptcy to leave behind student loans. The appellate court defended a legal test dating back to the late 1980s that requires borrowers seeking education-related bankruptcy relief to show they are totally incapable of repaying their student debt. Consumer advocates who filed papers supporting Thomas said that the test is outdated and came about before significant changes to modern student loan programs. “The consequence of the…test is that sympathetic debtors like Ms. Thomas are held to the same standard as debtors who are less sympathetic. But that is an outcome for Congress to address, should it desire,” wrote Circuit Judge Edith H. Jones.

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